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dc.contributor.authorRiis, Christian
dc.contributor.authorMoen, Espen R.
dc.date.accessioned2012-08-31T08:26:36Z
dc.date.available2012-08-31T08:26:36Z
dc.date.issued2010
dc.identifier.issn1891-599X
dc.identifier.urihttp://hdl.handle.net/11250/95456
dc.description.abstractIn their influential paper, Aghion and Bolton (1987) argue that a buyer and a seller may agree on high liquidation damages in order to extract rents from future suppliers. As this may distort future trade, it may be socially wasteful. We argue that Aghion and Bolton's analysis of entry is incomplete in some respects, as there is only one potential entrant in their model. We construct a model with many potential entrants. Entry is costly, so entering suppliers have to earn a quasi-rent in order to recoup their entry costs. Reducing the entrants' profits by the help of a breach penalty reduces the probability of entry, and this reduces the attractiveness of breach penalties for the contracting parties. We show that the initial buyer and seller only have incentives to include a positive breach penalty if there is excessive entry without it, in which case the breach penalty is welfare improving.no_NO
dc.language.isoengno_NO
dc.publisherBI Norwegian Business Schoolno_NO
dc.relation.ispartofseriesCREAM Publications;9/2010
dc.subjectExclusive contractsno_NO
dc.subjectbreach penaltiesno_NO
dc.subjectentryno_NO
dc.subjectefficiencyno_NO
dc.titleEfficient Exclusionno_NO
dc.typeWorking paperno_NO
dc.source.issue23 pagesno_NO


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