This paper examines the effects of exclusive dealing contracts offered by an incumbent
distributor. The effectiveness of exclusive dealing contracts offered by distributors is quite
different from those offered 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 efficient entrant must be excluded under the equilibrium as long as distributors have
sufficient bargaining power.
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