We analyze whether the use of breakup fees by an incumbent might induce an inefficient allocation of consumers and possibly foreclose efficient entry where buyers are non-pivotal (infinitesimal) and have to pay switching costs if they switch from the incumbent to an entrant. When the entrants...

Considering markets with non-pivotal buyers we analyze the anti-competitive effects of breakup fees used by an incumbent facing a more efficient entrant in the future. Buyers differ in their intrinsic switching costs. Breakup fees are profitably used to foreclose entry, regardless of the...

Considering markets with non-pivotal buyers we analyze the anti-competitive effects of breakup fees used by an incumbent facing a more efficient entrant in the future. Buyers differ in their intrinsic switching costs. Breakup fees are profitably used to foreclose entry, regardless of the...