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Star Wars: Exclusive Superstars and Collusive Outcomes

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  • 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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Bibliographic Info

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
Date of revision:
Handle: RePEc:unl:unlfep:wp496

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  1. Switgard Feuerstein, 2005. "Collusion in Industrial Economics—A Survey," Journal of Industry, Competition and Trade, Springer, Springer, vol. 5(3), pages 163-198, December.
  2. Fumagalli, Chiara & Motta, Massimo, 2002. "Exclusive Dealing and Entry, when Buyers Compete," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3493, C.E.P.R. Discussion Papers.
  3. Green, Edward J. & Porter, Robert H., 1982. "Noncooperative Collusion Under Imperfect Price Information," Working Papers, California Institute of Technology, Division of the Humanities and Social Sciences 367, California Institute of Technology, Division of the Humanities and Social Sciences.
  4. April M. Franco & Matthew F. Mitchell, 2008. "Covenants not to Compete, Labor Mobility, and Industry Dynamics," Journal of Economics & Management Strategy, Wiley Blackwell, Wiley Blackwell, vol. 17(3), pages 581-606, 09.
  5. 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.
  6. 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.
  7. Edlin, Aaron S & Reichelstein, Stefan, 1996. "Holdups, Standard Breach Remedies, and Optimal Investment," American Economic Review, American Economic Association, American Economic Association, vol. 86(3), pages 478-501, June.
  8. Ilya Segal, 2003. "Collusion, Exclusion, and Inclusion in Random-Order Bargaining," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 70(2), pages 439-460, 04.
  9. Aghion, Philippe & Bolton, Patrick, 1987. "Contracts as a Barrier to Entry," American Economic Review, American Economic Association, American Economic Association, vol. 77(3), pages 388-401, June.
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  11. B. Douglas Bernheim & Michael D. Whinston, 1996. "Exclusive Dealing," NBER Working Papers 5666, National Bureau of Economic Research, Inc.
  12. Rey, Patrick & Tirole, Jean, 2007. "A Primer on Foreclosure," Handbook of Industrial Organization, Elsevier, Elsevier.
  13. Motta,Massimo, 2004. "Competition Policy," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521016919.
  14. Vasconcelos, Luis, 2006. "Contractual signalling, relationship-specific investment and exclusive agreements," FEUNL Working Paper Series, Universidade Nova de Lisboa, Faculdade de Economia wp495, Universidade Nova de Lisboa, Faculdade de Economia.
  15. Rotemberg, Julio J & Saloner, Garth, 1986. "A Supergame-Theoretic Model of Price Wars during Booms," American Economic Review, American Economic Association, American Economic Association, vol. 76(3), pages 390-407, June.
  16. Gianni De Fraja & Jozsef Sakovics, 2004. "Walras Retrouve: Decentralized Trading Mechanisms and the Competitive Price," ESE Discussion Papers, Edinburgh School of Economics, University of Edinburgh 36, Edinburgh School of Economics, University of Edinburgh.
  17. David de Meza & Mariano Selvaggi, 2004. "Exclusive Contracts Foster Relationship-Specific Investment," The Centre for Market and Public Organisation, Department of Economics, University of Bristol, UK 04/105, Department of Economics, University of Bristol, UK.
  18. Compte, Olivier & Jenny, Frederic & Rey, Patrick, 2002. "Capacity constraints, mergers and collusion," European Economic Review, Elsevier, Elsevier, vol. 46(1), pages 1-29, January.
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