Exclusive Dealing and the Market Power of Buyers

This paper examines the e¤ects of exclusive dealing contracts o¤ered by an incumbent distributor. The e¤ectiveness of exclusive dealing contracts o¤ered by distributors is quite di¤erent from those o¤ered by incumbent manufacturers. The traditional literature has focused solely on exclusive dealing contracts made by incumbent manufacturers and has derived multiple equilibria within homogeneous price competition models. In contrast, this paper asserts that exclusive dealing contracts made by a distributor generate a unique equilibrium and that an e¢ cient entrant must be excluded under the equilibrium as long as distributors have su¢ cient bargaining power. Key words: Exclusive Dealing, Large Distributor, Antitrust Policy JEL Classi…cation: L11, L13, L14, L42, K21 Graduate School of Economics, University of Tokyo. (e-mail: [email protected]). yFaculty of Economics, University of Tokyo. (e-mail: [email protected])