Previous papers by Eric B. Rasmusen, J. Mark Ramseyer, and John S. Wiley, Jr. (1991) and Ilya R. Segal and Michael D. Whinston (2000) argue that exclusive contracts can inefficiently deter entry in the presence of scale economies and multiple buyers. We first show that these results no longer...

This paper shows that an upstream monopolist that sells to competing downstream firms can profitably use exclusive contracts to deter entry even where scale economies are absent. The incumbent monopolist can often place each downstream firm in a prisoner's dilemma by offering downstream firms a...