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Contracts as a Barrier to Entry: Impact of Buyer's Asymmetric Information and Bargaining Power
| Content Provider | Hyper Articles en Ligne (HAL) |
|---|---|
| Author | Martimort, David Pouyet, Jérôme Trégouët, Thomas |
| Copyright Year | 2021 |
| Abstract | An incumbent seller contracts with a buyer and faces the threat of entry. The contract stipulates a price and a penalty for breach if the buyer later switches to the entrant. Sellers are heterogenous in terms of the gross surplus they provide to the buyer. The buyer is privately informed on her valuation for the incumbent's service. Asymmetric information makes the incumbent favor entry as it helps screening buyers. When the entrant has some bargaining power vis-à-vis the buyer and keeps a share of the gains from entry, the incumbent instead wants to reduce entry. The compounding effect of these two forces may lead to either excessive entry or foreclosure, and possibly to a fixed rebate for exclusivity given to all buyers. |
| Related Links | https://hal.science/hal-03328387v2/file/IJIO-3rdRound.pdf |
| ISSN | 01677187 |
| DOI | 10.1016/j.ijindorg.2021.102791 |
| Journal | International Journal of Industrial Organization |
| Volume Number | 79 |
| Language | English |
| Publisher | HAL CCSD Elsevier |
| Publisher Date | 2021-12-01 |
| Access Restriction | Open |
| Subject Keyword | Incomplete information Foreclosure Excessive entry Exclusionary behavior Economics and Finance Quantitative Finance [q-fin] Humanities and Social Sciences |
| Content Type | Text |
| Resource Type | Article |
| Subject | Industrial and Manufacturing Engineering Arts and Humanities Economics, Econometrics and Finance Strategy and Management Social Sciences Economics and Econometrics Industrial Relations Aerospace Engineering |
