Pre‐commitment to an Exclusive Contract under Partial Regulation |
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Authors: | Keizo Mizuno |
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Affiliation: | School of Business Administration , Kwansei Gakuin University , 1‐1‐155 Uegahara, Nishinomiya , Hyogo, 662‐8501 , Japan E-mail: kmizuno@kwansei.ac.jp |
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Abstract: | This article examines the welfare implications of an incumbent’s pre‐commitment to an exclusive contract in a partially regulated environment. It shows that the contract offered to customers in a competitive market makes the first‐best allocation infeasible in the partially regulated environment. However, the contract can have a welfare‐enhancing property through the exclusion of inefficient entry or cream skimming in the competitive market, especially when the regulated price ceiling is low and the incumbent’s technology is characterized by a large proportion of common cost in total cost. |
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Keywords: | Pre‐commitment Exclusive Contract Partial Regulation Cream Skimming JEL classifications: L43, L51, L97 |
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