Coerced Reciprocal Dealing and the Leverage Theory

CAMA Working Paper No. 25/2012

34 Pages Posted: 4 Jun 2012

See all articles by Kalyn Coatney

Kalyn Coatney

Mississippi State University

Sherrill Shaffer

University of Wyoming

Date Written: June 2012


Recent international mergers have potentially revived interest in a long-standing concern of U.S. courts that, under certain conditions, a conglomerate that buys from and sells products to its intermediary supplier may be able to profitably leverage its downstream market power to restrict competition in the upstream market and harm welfare via coerced reciprocal dealing. Economists have debated the court precedent, invoking the leverage theory established from various models of tying arrangements, a cousin of coerced reciprocal dealing. We develop the first explicit model of coerced reciprocal dealings to investigate the validity of the leverage theory. Our results support the concerns.

Suggested Citation

Coatney, Kalyn and Shaffer, Sherrill, Coerced Reciprocal Dealing and the Leverage Theory (June 2012). CAMA Working Paper No. 25/2012. Available at SSRN: or

Kalyn Coatney

Mississippi State University ( email )

Mississippi State, MS 39762
United States


Sherrill Shaffer (Contact Author)

University of Wyoming ( email )

P.O. Box 3985
Laramie, WY 82071-3985
United States
307-766-2173 (Phone)
307-766-5090 (Fax)

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