Exclusive contracts with complementary inputs

Hiroshi Kitamura, Noriaki Matsushima, Misato Sato

Research output: Contribution to journalArticle

Abstract

This study constructs a model of anticompetitive exclusive contracts in the presence of complementary inputs. A downstream firm transforms multiple complementary inputs into final products. When complementary input suppliers have market power, upstream competition within a given input market benefits not only the downstream firm, but also the complementary input suppliers, by raising complementary input prices. Thus, the downstream firm is unable to earn higher profits, even when socially efficient entry is allowed. Hence, the inefficient incumbent supplier can deter socially efficient entry by using exclusive contracts, even in the absence of scale economies, downstream competition, and relationship-specific investment.

Original languageEnglish
Pages (from-to)145-167
Number of pages23
JournalInternational Journal of Industrial Organization
Volume56
DOIs
Publication statusPublished - Jan 2018
Externally publishedYes

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Keywords

  • Antitrust policy
  • Complementary inputs
  • Exclusive dealing
  • Multiple inputs

ASJC Scopus subject areas

  • Industrial relations
  • Aerospace Engineering
  • Economics and Econometrics
  • Economics, Econometrics and Finance (miscellaneous)
  • Strategy and Management
  • Industrial and Manufacturing Engineering

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