Nonlinear pricing and exclusion:II. Must-stock products

Dominant firms often are unavoidable trading partners. Buyers may consider switching a fraction of their requirements to rival products, but that fraction is highly uncertain in rapidly evolving industries. Nonlinear pricing serves to adjust the competitive pressure placed on rival firms, depending on the joint distribution of the buyer willingness to pay for the rival's good and the share of contestable demand. Concave price-quantity schedules erect barriers to entry. Convex parts in schedules introduce barriers to expansion. Dominant firms use all-units discounts to create high entry barriers for rival firms with intermediate levels of contestable demand.