Journal Articles

Naked Exclusion

1991, American Economic Review

J. Mark Ramseyer, Eric Bennett Rasmusen, John Wiley

Abstract

Ordinarily, a monopoly cannot increase its profits by asking customers to sign agreements not to deal with potential competitors. If, however, there are 100 customers and the minimum efficient scale requires serving 15, the monopoly need only lock up 86 customers to forestall entry. If each customer believes that the others will sign, each also believes that no rival seller will enter. Hence, an individual customer loses nothing by signing the exclusionary agreement and will indeed sign. Thus, naked exclusion can be profitable.

Citation

Rasmusen, Eric Bennett, J. Mark Ramseyer, and John Wiley (1991), "Naked Exclusion," American Economic Review, Vol. 81, No. 5, December, pp. 1137-1145. John Wiley). Rasmusen_91AER.exclusion.pdf. See also to a comment/extension/correction by Siegel and Whinston (AER, March 1990: 90: 310-311) and longer comments (ascii))(299).