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Exclusive dealing with network effects

Doğanoğlu, Toker and Wright, Julian (2006) Exclusive dealing with network effects. [Working Paper / Technical Report] Sabanci University ID:SU_FASS_2006/0003

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Abstract

This paper explores the ability of an incumbent to use exclusive deals or introductory offers to dominate a market in the face of entry when network effects rather than scale economies are present. When consumers can only join one or other firm, the incumbent will make discriminatory o ers that are anticompetitive and ine cient. Allowing consumers to multihome, we find o ers that only require consumers to commit to purchase from the incumbent are not anticompetitive, while contracts which prevent consumers from also buying from the entrant in the future are anticompetitive and ine cient. The finding extends to two-sided markets, where the incumbent signs up "sellers" exclusively with attractive offers and exploits "buyers".

Item Type:Working Paper / Technical Report
Uncontrolled Keywords:Exclusive deals; networks; foreclosure; two-sided markets.
Subjects:H Social Sciences > HF Commerce
ID Code:818
Deposited By:Uğur Toker Doğanoğlu
Deposited On:19 Dec 2006 02:00
Last Modified:25 Oct 2007 21:40

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