Does Prohibiting 'Lock-In' Improve Aftermarket Outcomes? Evidence from the Fairness to Contact Lens Consumers Act

35 Pages Posted: 12 Sep 2012  

James C. Cooper

George Mason University - Antonin Scalia Law School, Faculty

Date Written: September 11, 2012

Abstract

Because a patient must have a prescription to purchase contact lenses, prescribing eye care professional (ECPs) have incentives to take advantage of locked-in patients. I use the Fairness to Contact Lens Consumers Act (FCLCA) – which outlawed lock-in – as a natural experiment to perform (to my knowledge) the first empirical examination of the effect of lock-in on aftermarket prices. Examination of the pre- and post-FCLCA price gap between ECPs and online sellers indicates that pricing in the contact lens market has not systematically changed since FCLCA. One conjecture from these results is that search costs may be responsible for persistent ECP premiums in this market. To the extent that they are generalizable, these results also indicate that the current antitrust treatment of power derived from proprietary aftermarkets may be welfare reducing.

Keywords: Lock-in, Hold-up, Antitrust, Aftermarkets, Contact Lenses, E-commerce, Search Costs

JEL Classification: K20, L81, L10, D83

Suggested Citation

Cooper, James C., Does Prohibiting 'Lock-In' Improve Aftermarket Outcomes? Evidence from the Fairness to Contact Lens Consumers Act (September 11, 2012). Available at SSRN: https://ssrn.com/abstract=2145540 or http://dx.doi.org/10.2139/ssrn.2145540

James C. Cooper (Contact Author)

George Mason University - Antonin Scalia Law School, Faculty ( email )

3301 Fairfax Drive
Arlington, VA 22201
United States
703-993-9582 (Phone)

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