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Article
Naked Exclusion with Private Offers
American Economic Journal: Microeconomics (2016)
  • Jeanine Miklos-Thal, University of Rochester
  • Greg Shaffer, University of Rochester
Abstract
We consider a seller’s ability to deter potential entrants by offering exclusive contracts to its downstream buyers. Rasmusen, Ramseyer, and Wiley (1991) showed that this can be a profitable strategy if there is a coordination failure on the part of the buyers. Segal and Whinston (2000) showed that the seller need not rely on a coordination failure if it can make discriminatory “divide-and-conquer” offers. These papers and the literature that followed has assumed that all offers are public. We show that if buyers cannot observe each other’s offers and have passive or wary out-of-equilibrium beliefs, the divide-and-conquer exclusion strategy fails. Equilibria in which the incumbent obtains exclusion for free due to a coordination failure on the part of the buyers, on the other hand, exist for all out-of-equilibrium beliefs.
Keywords
  • exclusive dealing,
  • divide-and-conquer offers,
  • unobservable contracts
Publication Date
March, 2016
Citation Information
Jeanine Miklos-Thal and Greg Shaffer. "Naked Exclusion with Private Offers" American Economic Journal: Microeconomics (2016)
Available at: http://works.bepress.com/jmiklosthal/13/