Download this Paper Open PDF in Browser

Exclusive Dealing Intensifies Competition for Distribution

34 Pages Posted: 9 Jul 2011  

Kevin M. Murphy

University of Chicago; National Bureau of Economic Research (NBER)

Benjamin Klein

University of California, Los Angeles (UCLA) - Department of Economics; Compass Lexecon

Date Written: 2008

Abstract

Manufacturer competition for retail distribution is shown to often include partially exclusive contracts when competitive retailers have the ability to shift sales by loyal customers to a chosen manufacturer. Since each manufacturer knows its sales will increase substantially at the expense of rival brands if selected for partial exclusivity by the retailer, manufacturers will reduce their wholesale prices in the attempt to be selected. Inter-retailer competition will then largely pass the lower wholesale prices on to consumers in lower retail prices. Retailers can be thought of as acting as agents for their loyal consumers, trading off reduced product variety for price reductions preferred by their consumers as a group. The economic analysis provides a procompetitive justification for restricted distribution arrangements in the supermarket industry that have been the subject of antitrust litigation, and can be used to explain restricted distribution arrangements in the economy more generally.

Keywords: exclusive dealing

JEL Classification: L42, K21

Suggested Citation

Murphy, Kevin M. and Klein, Benjamin, Exclusive Dealing Intensifies Competition for Distribution (2008). Antitrust Law Journal, Vol. 75, No. 2, 2008. Available at SSRN: https://ssrn.com/abstract=1656635

Kevin M. Murphy

University of Chicago ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-7280 (Phone)
773-702-2699 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Benjamin Klein (Contact Author)

University of California, Los Angeles (UCLA) - Department of Economics ( email )

1999 Avenue of the Stars
Suite 1150
Los Angeles, CA 90067-4628
United States
310-728-2025 (Phone)
310-728-2070 (Fax)

HOME PAGE: http://www.econ.ucla.edu/people/Faculty/Klein.html

Compass Lexecon ( email )

1999 Avenue of the Stars
Suite 1150
Los Angeles, CA 90067-4628
United States
310-728-2025 (Phone)
310-728-2070 (Fax)

HOME PAGE: http://www.compasslexecon.com/professionals/bio?id=152

Paper statistics

Downloads
332
Rank
75,314
Abstract Views
1,807