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on Industrial Organization |
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Issue of 2009‒05‒09
two papers chosen by |
| By: | João Leão (MIT - Department of Economics, ISCTE - Department of Economics and UNIDE-ERC) |
| Abstract: | This paper examines the use of exclusive dealing agreements to prevent the entry of rival firms. An exclusive dealing agreement is a contract between a buyer and a seller where the buyer commits to buy a good exclusively from the seller. One main concern of the literature is to explain how an incumbent seller is able to persuade the buyers to sign an exclusive dealing agreement that deters the entry of a more efficient rival seller. We propose a new explanation when the buyers are downstream firms and both the seller and the buyers face the threat of entry. In this case, the entry of more efficient upstream seller, by decreasing the market power of the upstream firms, can make entry in the downstream market more attractive. This can lead to further entry in the downstream market and to an increase in the competition faced by the downstream firms. Since part of the bigger surplus created by the entry of a more efficient seller is now captured by the downstream entrant firms, entry in the upstream market does not necessarily benefit the incumbent downstream firms. |
| Date: | 2008–06 |
| URL: | http://d.repec.org/n?u=RePEc:isc:wpaper:ercwp2408&r=ind |
| By: | Einy, Ezra; Haimanko, Ori; Moreno, Diego; Shitovitz, Benyamin |
| Abstract: | We show that when firms have incomplete information about the market demand and their costs, a (Bayesian) Cournot equilibrium in pure strategies may not exist, or be unique. In fact, we are able to construct surprisingly simple and robust examples of duopolies with these features. However, we also find some sufficient conditions for existence, and for uniqueness, of Cournot equilibrium in a certain class of industries. More general results arise when negative prices are possible. |
| Keywords: | Oligopoly, Incomplete Information, Bayesian, Cournot, Equilibrium, Existence, Uniqueness |
| JEL: | C72 D43 L13 |
| Date: | 2008–10 |
| URL: | http://d.repec.org/n?u=RePEc:hit:econdp:2008-11&r=ind |