The Competitive Effects of Parity Clauses on Online Commerce
36 Pages Posted: 13 Oct 2015
Date Written: October 11, 2015
Parity clauses, also known as most-favoured-nation clauses, are designed to address the hold-up problem in vertical relations and facilitate investment and efficiencies by the downstream platform. However, when designed too broadly, they have the potential of undermining the dynamics of competition and reducing consumer welfare. This paper explores the welfare effects of parity clauses and reflects on the level of intervention they may call for. It reviews the possible theories of harm associated with parity clauses and draws a dividing line between the effects generated by narrow and wide parity.
Keywords: Parity clause, Most Favoured Nation clause, Price Comparison websites
JEL Classification: K21, L11, L16, L41, L42
Suggested Citation: Suggested Citation