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'Exclusion through Speculation'

Detail Summary
Date 8 February 2010
Time 11:45 - 13:30

Exclusion through Speculation (with Bert Willems)

Abstract
Many products are traded on both a spot market and a financial market. We show that an incumbent producer and a large buyer may have a joint interest in using financial instruments so as to extract rent from a potential entrant. The incumbent can indeed use those instruments to "commit" himself to compete aggressively in the spot market and drive the price down for the entrant. It can do so by selling more option contracts than his expected production level, i.e. by taking a speculative position. This comes at the cost of inefficiently deterring entry.

Paper Argenton
Oudemanhuispoort
Oudemanhuispoort

Oudemanhuispoort 4-6
1012 CN Amsterdam