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Title:
Exclusionary contracts, entry and communication . (D/697 )
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Authors:
Gerlach, H.
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Summary:
I examine the incentives of firms to communicate entry into an industry where the incumbent writes exclusionary, long-term contracts with consumers. The entrant's information provision affects the optimal contract proposal by the incumbent and leads to communication incentives that are highly non-linear in the size of the innovation. Entry with small and medium-to-large innovations is announced, whereas small-to-medium and large innovations are not communicated. It is demonstrated that this equilibrium communication behavior maximizes ex ante total welfare by reducing the anti-competitive impact of excessively exclusive contracts. By contrast, consumers always prefer more communication and the incumbent's equilibrium contract maximizes ex ante consumer surplus. |
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Date:
01/05/2007
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Type:
Working papers
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Language:
English
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