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Exclusive Dealing

46 Pages Posted: 25 Sep 1996  

B. Douglas Bernheim

Stanford University - Department of Economics; National Bureau of Economic Research (NBER)

Michael D. Whinston

Sloan School of Management and Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: July 1996

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.

JEL Classification: L1,L2,L4

Suggested Citation

Bernheim, B. Douglas and Whinston, Michael D., Exclusive Dealing (July 1996). NBER Working Paper 5666. Available at SSRN: https://ssrn.com/abstract=1302 or http://dx.doi.org/10.2139/ssrn.1302

B. Douglas Bernheim (Contact Author)

Stanford University - Department of Economics ( email )

Landau Economics Building
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Stanford, CA 94305-6072
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650-725-8732 (Phone)
650-725-5702 (Fax)

National Bureau of Economic Research (NBER)

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Michael D. Whinston

Sloan School of Management and Department of Economics ( email )

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E62-416
Cambridge, MA 02142
United States

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