Working Paper: NBER ID: w5666
Authors: B. Douglas Bernheim; Michael D. Whinston
Abstract: In this paper, we provide a conceptual framework for understanding the phenomenon of exclusive dealing, and we explore the motivations for and effects of its use. For a broad class of models, we characterize the outcome of a contracting game in which manufacturers may employ exclusive dealing provisions in their contracts. We then apply this characterization to a sequence of specialized settings. We demonstrate that exclusionary contractual provisions may be irrelevant, anticompetitive, or efficiency-enhancing, depending upon the setting. More specifically, we exhibit the potential for anticompetitive effects in non-coincident markets (that is, markets other than the ones in which exclusive dealing is practiced), and we explore the potential for the enhancement of efficiency in a setting where common representation gives rise to incentive conflicts. In each instance, we describe the manner in which equilibrium outcomes would be altered by a ban on exclusive dealing. We demonstrate that a ban may have surprisingly subtle and unintended effects.
Keywords: exclusive dealing; antitrust; contracting; market competition
JEL Codes: K21; L41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| exclusive dealing (L14) | anticompetitive effects in noncoincident markets (L12) |
| exclusive dealing (L14) | better merchandising efforts by retailers (L81) |
| banning exclusive dealing (L49) | less efficient practices such as quantity forcing (L42) |