Exclusionary Vertical Restraints and Antitrust: Experimental Law and Economics Contributions

Abstract:     
Vertical restraints have been subject of lively policy and academic discussions. Scholars associated with the Chicago School challenged early foreclosure doctrines by arguing that vertical restraints primarily reflected efficiency considerations. More recently, industrial organization economists have used the tools of game theory and information economics to show that these business practices might actually serve anticompetitive purposes. The influence of the new economic theories on antitrust policies has been limited by the complexity of the models and the scarcity of empirical evidence. Experimental law and economics might advance the knowledge of the factors that affect the anticompetitive effects of vertical restraints. Hence, it might strengthen the contributions of academic work to the design and implementation of antitrust policies. This chapter is intended to contribute to the discussion of the exclusionary effects of vertical restraints, and the role of experimental law and economics in antitrust law. Special attention is devoted to vertical integration, exclusive dealing contracts, and tying and bundling practices. Although the experimental literature on exclusionary vertical restraints is relatively recent, the findings from these studies provide important insights. First, this research indicates that vertical restraints might indeed be used as market foreclosure mechanisms. Second, this work identifies previously non-modeled factors that might influence the effects of these business practices. My analysis underscores the importance of combining experimental and behavioral observation with theoretical modeling.

Number of Pages in PDF File: 35

Keywords: Vertical Restraints, Experimental Law and Economics, Antitrust; Vertical Integration, Exclusive Dealing Contracts, Bundling, Tying, Stipulated Damages, Contract Renegotiation, Non-Monetary Preferences, Payoff Aspirations, Communication, Intentionality, Reciprocity, Bargaining, Coordination Games

JEL Classification: K21, K41, C72, C90, L12, L40, C72, C91, D62, D86, K12, K21, K41, L42

Accepted Paper Series