A Comment on ‘Buyers' Miscoordination, Entry and Downstream Competition’

Abstract Fumagalli and Motta (The Economic Journal, 2008) argued that competition among downstream buyers limits the ability of a dominant upstream firm to deter entry by a more efficient competitor. This comment demonstrates that the impact of downstream competition is, in fact, more complex. In particular, competition can motivate buyers to favour the incumbent due to a ‘raising rivals’ cost’ effect.