Sometimes a monopoly firm tries to "lock in" a customer by exclusive dealing. That is, the monopolist offers to sell its product at a price and maybe pays the consumer some "sign-up" bonus. In exchange, the consumer promises to only buy from the monopoly firm.

Suppose that Firm C offers such a contract to the consumer: If the consumer signs the contract, Firm C will pay the consumer a sign-up bonus $x and promise a selling price $p^c. After signing the contract, the consumer can only purchase from Firm C (that is, there is no breach of contract). Assume that, upon indifference, the consumer will sign the contract.

Firm D observes the content of the contract and the consumer's decision to accept or reject the contract, and then makes its entry decision. Other aspects of the game remain the same.