Vertical Foreclosure Using Exclusivity Clauses: Evidence from Shopping Malls

37 Pages Posted: 17 Sep 2013 Last revised: 27 Nov 2013

See all articles by Itai Ater

Itai Ater

Tel Aviv University - The Leon Recanati Graduate School of Business Administration

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Date Written: November 19, 2013

Abstract

Exclusive contracts are one of the most controversial topics in the economic analysis of antitrust. Yet, very few empirical papers analyze the determinants and the consequences of exclusive contracts. In this paper, I study exclusive contracts between hamburger restaurants and Israeli shopping malls, in which mall owners commit to prohibiting additional hamburger restaurants from entering their malls. I investigate the determinants of these exclusive contracts and examine how such contracts affect the number of hamburger restaurants and their sales. I show that exclusive contracts are less likely to be adopted in larger malls, in malls that face more competition from other malls, and in malls that opened before 1993, when McDonald's and Burger King entered the Israeli market. I then use the mall's opening year - before or after 1993 - as an instrumental variable to estimate a negative effect of exclusive contracts on the number of restaurants and on total mall hamburger sales. My findings are generally consistent with anti-competitive vertical foreclosure models.

Keywords: vertical restraints, exclusive dealing, shopping malls, antitrust, foreclosure

JEL Classification: K21, L42

Suggested Citation

Ater, Itai, Vertical Foreclosure Using Exclusivity Clauses: Evidence from Shopping Malls (November 19, 2013). Available at SSRN: https://ssrn.com/abstract=2326927 or http://dx.doi.org/10.2139/ssrn.2326927

Itai Ater (Contact Author)

Tel Aviv University - The Leon Recanati Graduate School of Business Administration ( email )

P.O. Box 39010
Ramat Aviv Tel Aviv 69972, 69978
Israel

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