Exclusive contracts and demand foreclosure

Pre-print, Working paper: A firm may decide to have some of its customers sign exclusive contracts in order to deprive a rival of the minimum viable size, exclude it from the market, and enjoy increased market power. If contracts are required to be simple enough, this strategy may induce inefficient exclusion even if the excluded firm is present at the contracting stage. Exclusive contracts may thus cause inefficient eviction, not only entry-deterrence, even though the former is less likely than the latter. However, complex enough contracts, if feasible, would allow agents to reach a Pareto-optimum, without inefficient exclusion.

Author(s)

David Spector

Date of publication
  • 2007
Keywords JEL
L12 L13 L14 L41 L42
Keywords
  • Exclusive dealing
  • Foreclosure
  • Exclusionary strategies
Internal reference
  • PSE Working Papers n°2007-07
Version
  • 1