Abstract:
Recent years have seen the emergence of contracts in which buyers commit to giving a seller some minimum share of their total purchases. We consider an incumbent sellerís use of such contracts to ine¢ ciently deter entry in the presence of scale economies. Building on previous work by Rasmusen et al (1991), Segal and Whinston (2000), and Simpson and Wickelgren (2007), which focuses on exclusive-dealing arrangements, we Önd that contracts that have minimum-share requirements can be proÖtable for the incumbent even when requiring full exclusivity would not be, even when buyers can breach their contracts without having to pay expectation damages to the incumbent, and even when buyers can coordinate on their accept-or-reject decisions. A novel feature of the analysis is that these contracts can be anticompetitive even if the exclusionary conduct fails to deter entry or raise the entrantís costs.