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Star Wars: Exclusive Superstars and Collusive Outcomes

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Author Info
Selvaggi, Marianao
Vasconcelos, Luis
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 aspects 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.

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Paper provided by Universidade Nova de Lisboa, Faculdade de Economia in its series FEUNL Working Paper Series with number wp496.

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Length: 37 pages
Date of creation: 2006
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Handle: RePEc:unl:unlfep:wp496

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  1. Vasconcelos, Luis, 2006. "Contractual signalling, relationship-specific investment and exclusive agreements," FEUNL Working Paper Series wp495, Universidade Nova de Lisboa, Faculdade de Economia. [Downloadable!]
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  3. David de Meza & Mariano Selvaggi, 2004. "Exclusive Contracts Foster Relationship-Specific Investment," The Centre for Market and Public Organisation 04/105, Department of Economics, University of Bristol, UK. [Downloadable!]
  4. Green, Edward J & Porter, Robert H, 1984. "Noncooperative Collusion under Imperfect Price Information," Econometrica, Econometric Society, vol. 52(1), pages 87-100, January. [Downloadable!] (restricted)
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  5. Aaron Edlin & Stefan Reichelstein, 1995. "Holdups, Standard Breach Remedies, and Optimal Investment," Berkeley Olin Program in Law & Economics, Working Paper Series 1155, Berkeley Olin Program in Law & Economics. [Downloadable!]
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  6. Gianni De Fraja & Jozsef Sakovics, 2001. "Walras Retrouve: Decentralized Trading Mechanisms and the Competitive Price," Journal of Political Economy, University of Chicago Press, vol. 109(4), pages 842-863, August. [Downloadable!] (restricted)
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  7. Rey, Patrick & Tirole, Jean, 2003. "A Primer on Foreclosure," IDEI Working Papers 203, Institut d'Économie Industrielle (IDEI), Toulouse, revised Nov 2005. [Downloadable!]
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  8. Rotemberg, Julio J & Saloner, Garth, 1986. "A Supergame-Theoretic Model of Price Wars during Booms," American Economic Review, American Economic Association, vol. 76(3), pages 390-407, June. [Downloadable!] (restricted)
  9. April M. Franco & Matthew F. Mitchell, 2008. "Covenants not to Compete, Labor Mobility, and Industry Dynamics," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 17(3), pages 581-606, 09. [Downloadable!] (restricted)
  10. Fumagalli, Chiara & Motta, Massimo, 2002. "Exclusive Dealing and Entry, when Buyers Compete," CEPR Discussion Papers 3493, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  11. Aghion, Philippe & Bolton, Patrick, 1987. "Contracts as a Barrier to Entry," American Economic Review, American Economic Association, vol. 77(3), pages 388-401, June.
  12. Abreu, Dilip, 1988. "On the Theory of Infinitely Repeated Games with Discounting," Econometrica, Econometric Society, vol. 56(2), pages 383-96, March. [Downloadable!] (restricted)
  13. Ilya Segal, 2003. "Collusion, Exclusion, and Inclusion in Random-Order Bargaining," Review of Economic Studies, Blackwell Publishing, vol. 70(2), pages 439-460, 04. [Downloadable!] (restricted)
  14. Patrick Rey & Joseph Stiglitz, 1995. "The Role of Exclusive Territories in Producers' Competition," RAND Journal of Economics, The RAND Corporation, vol. 26(3), pages 431-451, Autumn. [Downloadable!] (restricted)
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  15. B. Douglas Bernheim & Michael D. Whinston, 1998. "Exclusive Dealing," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 64-103, February. [Downloadable!] (restricted)
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  16. Compte, Olivier & Jenny, Frederic & Rey, Patrick, 2002. "Capacity constraints, mergers and collusion," European Economic Review, Elsevier, vol. 46(1), pages 1-29, January. [Downloadable!] (restricted)
  17. Ilya Segal & Michael D. Whinston, 2000. "Exclusive Contracts and Protection of Investments," RAND Journal of Economics, The RAND Corporation, vol. 31(4), pages 603-633, Winter.
  18. B. Douglas Bernheim & Michael D. Whinston, 1990. "Multimarket Contact and Collusive Behavior," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 1-26, Spring. [Downloadable!] (restricted)
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