Star Wars: Exclusive Superstars and Collusive Outcomes

FEUNL Working Paper No. 496

37 Pages Posted: 20 Sep 2006 Last revised: 22 Dec 2013

See all articles by Mariano Selvaggi

Mariano Selvaggi

London School of Economics & Political Science (LSE)

Luis I. Vasconcelos

New University of Lisbon - Faculdade de Economia

Date Written: July 1, 2006

Abstract

We examine the impact of agreements that prohibit superstars from switching their services to rivals on firms' ability to collude. Exclusivity (or non-compete) clauses are not uncommon in the sports, entertainment and professional services industries, but courts often refrain from enforcing them owing to inequity and/or restraint of trade considerations. We argue this attitude may be misguided. While in the collusive path exclusion may be inconsequential because firms agree not to hire each other's star, its enforcement level affects the severity of future punishments. For exclusive talent may not be poached by rivals. The ability to sustain tacit collusion may thus be impaired, which in plausible constellations leads to efficiency improvements and more equitable distribution of rents.

Keywords: collusion, contract enforcement, exclusive contracts, non-compete covenants, supergames, superstars

JEL Classification: J44, K21, L42

Suggested Citation

Selvaggi, Mariano and Vasconcelos, Luis I., Star Wars: Exclusive Superstars and Collusive Outcomes (July 1, 2006). FEUNL Working Paper No. 496, Available at SSRN: https://ssrn.com/abstract=931429 or http://dx.doi.org/10.2139/ssrn.931429

Mariano Selvaggi (Contact Author)

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom
4402079557544 (Phone)

Luis I. Vasconcelos

New University of Lisbon - Faculdade de Economia ( email )

Campus de Campolide
Lisboa, 1099-032
Portugal
+35121380172 (Phone)

HOME PAGE: http://docentes.fe.unl.pt/~lipv064/

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