Exclusive Dealing and Market Foreclosure: Further Experimental Results

Abstract:     
This paper reports further experimental results on exclusive dealing contracts. We extend Landeo and Spier's (2009) work by studying Naked Exclusion in a strategic environment that involves a four-player, two-stage game. In addition to the roles of seller and buyers, our experimental environment includes the role of a potential entrant (a fourth passive player). Our findings are as follows. First, payoff endogeneity increases the likelihood of exclusion. Second, communication between the potential entrant and the buyers increases buyers' coordination on their preferred equilibrium (equilibrium with entry) and hence, reduces the likelihood of exclusion. Communication also induces more generous offers.

Number of Pages in PDF File: 27

Keywords: Exclusive Dealing, Coordination Games, Experiments, Contracting with Externalities, Bargaining with Externalities, Social Preferences, Reciprocity, Intentionality, Regard for Others, Social Proximity, Antitrust

JEL Classification: C72, C91, D62, D86, K12

Accepted Paper Series