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Deconstructing Chicago on Exclusive Dealing

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  • Joseph Farrell

    (Department of Economics, University of California at Berkeley)

Abstract

While exclusive dealing can be efficient, the Chicago School has also argued that it cannot be anticompetitive, or that it seldom is. That argument takes two forms; both are weak. First, a pricetheory argument (“the Chicago Three-Party Argument”) depends crucially on a special model of oligopoly and predicts that we will never see what we see. I show how simply replacing the embedded oligopoly model suggests new efficiency and anticompetitive motives for exclusive dealing; these motives differ markedly from those usually discussed. Second, “the Chicago Vertical Question” is a challenge to theories of anticompetitive vertical practices, including exclusive dealing. While that Question is salutary and helpful, its apparent force dissipates if we pay careful attention to externalities, as others have noted, and to the issue of alternatives versus benchmarks, as I describe below. Overall, economic logic does not support any general presumption that exclusive dealing is efficient.

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Bibliographic Info

Paper provided by EconWPA in its series Industrial Organization with number 0504017.

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Length: 15 pages
Date of creation: 14 Apr 2005
Date of revision:
Handle: RePEc:wpa:wuwpio:0504017

Note: Type of Document - pdf; pages: 15
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Web page: http://128.118.178.162

Related research

Keywords: Exclusive dealing; vertical restraints; monopoly; antitrust;

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Cited by:
  1. Chiara Fumagalli & Massimo Motta & Thomas Roende, 2009. "Exclusive dealing, entry, and mergers," CSEF Working Papers 225, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  2. Louis Kaplow & Carl Shapiro, 2007. "Antitrust," NBER Working Papers 12867, National Bureau of Economic Research, Inc.
  3. Fumagalli, Chiara & Motta, Massimo & Persson, Lars, 2007. "On the Anticompetitive Effect of Exclusive Dealing when Entry by Merger is Possible," Working Paper Series 718, Research Institute of Industrial Economics.
  4. Argenton, Cédric, 2006. "Exclusive Quality," Working Paper Series in Economics and Finance 640, Stockholm School of Economics, revised 17 Nov 2006.

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