@article{8868de4c3fea4c9290843cc8bf89f8eb,
title = "Relationship-specific investment as a barrier to entry",
abstract = "This study constructs a model of a relationship-specific investment in a dynamic framework. Although such investment decreases operating costs and increases the current joint profits of firms in vertical relationships, its specificity reduces the ex-post flexibility to change a trading partner in the future. We demonstrate that whether the investment contract deters entry even in the absence of exclusionary terms depends on not only the specificity but also the efficiency of the investment. We also show that an increase in the investment efficiency does not necessarily improve the equilibrium social welfare.",
keywords = "Entry deterrence, Relationship-specific investment, Switching costs, Vertical relation",
author = "Hiroshi Kitamura and Akira Miyaoka and Misato Sato",
note = "Funding Information: We would like to thank Katsuya Takii, Yuki Amemiya, Reiko Aoki, Koki Arai, Hiroaki Ino, Akira Ishii, Hideshi Itoh, Masayuki Kanezaki, Keisuke Hattori, Noriaki Matsushima, Keizo Mizuno, Jun Nakabayashi, Hiroyuki Odagiri, Jun Oshiro, Daniel Rubinfeld, Daisuke Shimizu, Tetsuya Shinkai, Mitsuru Sunada, Noriyuki Yanagawa, Takenobu Yuki, conference participants at the Japanese Association for Applied Economics, Japanese Economic Association, and Institutions and Economics International Conference, and seminar participants at Hitotsubashi University, Japan Fair Trade Commission, Kwansei Gakuin University, Osaka University, Osaka Prefecture University, and Sapporo Gakuin University for the helpful discussions and comments. We also thank the editor, Giacomo G. Corneo, and three anonymous referees for their constructive comments and suggestions. We gratefully acknowledge financial support from JSPS KAKENHI Grant Numbers 22243022, 22830075, 24730220, 12J01593, 15H03349, and 15K17060 and from the Global COE program, “Human Behavior and Socioeconomic Dynamics,” of Osaka University. The second author is a JSPS Research Fellow. The usual disclaimer applies. Publisher Copyright: {\textcopyright} 2016, Springer-Verlag Wien.",
year = "2016",
month = sep,
day = "1",
doi = "10.1007/s00712-016-0482-8",
language = "English",
volume = "119",
pages = "17--45",
journal = "Journal of Economics/ Zeitschrift fur Nationalokonomie",
issn = "0931-8658",
publisher = "Springer Wien",
number = "1",
}