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On the Dampening-of-Competition Effect of Exclusive Dealing


  • O'Brien, Daniel P
  • Shaffer, Greg


The authors compare and contrast the profit and welfare effects of exclusive dealing, sales through a common retailer, and vertical integration. As did Y. J. Lin (1990), the authors find that imperfectly competitive manufacturers prefer to impose exclusive dealing on their retailers. Unlike Lin, the authors find that welfare is higher under exclusive dealing than when products are sold through a common retailer. This finding suggests a new interpretation of the Standard Stations v. United States 1949 antitrust case. Copyright 1993 by Blackwell Publishing Ltd.

Suggested Citation

  • O'Brien, Daniel P & Shaffer, Greg, 1993. "On the Dampening-of-Competition Effect of Exclusive Dealing," Journal of Industrial Economics, Wiley Blackwell, vol. 41(2), pages 215-221, June.
  • Handle: RePEc:bla:jindec:v:41:y:1993:i:2:p:215-21

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    References listed on IDEAS

    1. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, January.
    2. Bolton, Patrick & Scharfstein, David S, 1990. "A Theory of Predation Based on Agency Problems in Financial Contracting," American Economic Review, American Economic Association, vol. 80(1), pages 93-106, March.
    3. Paul Beaudry & Michel Poitevin, 1994. "The Commitment Value of Contracts under Dynamic Renegotiation," RAND Journal of Economics, The RAND Corporation, vol. 25(4), pages 501-517, Winter.
    4. Mathias Dewatripont, 1988. "Commitment Through Renegotiation-Proof Contracts with Third Parties," Review of Economic Studies, Oxford University Press, vol. 55(3), pages 377-390.
    5. Mitchell A. Petersen & Raghuram G. Rajan, 1995. "The Effect of Credit Market Competition on Lending Relationships," The Quarterly Journal of Economics, Oxford University Press, vol. 110(2), pages 407-443.
    6. Bensaid, B. & Gary-Bobo, J., 1991. "On the commitment value of contracts under renegotiation constraints," CORE Discussion Papers 1991002, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    7. Mathias Dewatripont, 1988. "Commitment through renegotiation-proof contacts with third parties," ULB Institutional Repository 2013/9569, ULB -- Universite Libre de Bruxelles.
    8. Michael L. Katz, 1991. "Game-Playing Agents: Unobservable Contracts as Precommitments," RAND Journal of Economics, The RAND Corporation, vol. 22(3), pages 307-328, Autumn.
    9. Maskin, Eric & Tirole, Jean, 1992. "The Principal-Agent Relationship with an Informed Principal, II: Common Values," Econometrica, Econometric Society, vol. 60(1), pages 1-42, January.
    10. Bolton, Patrick, 1990. "Renegotiation and the dynamics of contract design," European Economic Review, Elsevier, vol. 34(2-3), pages 303-310, May.
    11. Caillaud, Bernard & Jullien, B & Picard, P, 1995. "Competing Vertical Structures: Precommitment and Renegotiation," Econometrica, Econometric Society, vol. 63(3), pages 621-646, May.
    12. Bensaid, Bernard & Gary-Bobo, Robert J, 1993. "Commitment Value of Contracts under Renegotiation Constraints," Econometrica, Econometric Society, vol. 61(6), pages 1423-1429, November.
    13. Douglas Gale & Martin Hellwig, 1985. "Incentive-Compatible Debt Contracts: The One-Period Problem," Review of Economic Studies, Oxford University Press, vol. 52(4), pages 647-663.
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    Cited by:

    1. Gérard P. Cachon & A. Gürhan Kök, 2010. "Competing Manufacturers in a Retail Supply Chain: On Contractual Form and Coordination," Management Science, INFORMS, vol. 56(3), pages 571-589, March.
    2. Irmen, Andreas, 1998. " Precommitment in Competing Vertical Chains," Journal of Economic Surveys, Wiley Blackwell, vol. 12(4), pages 333-359, September.
    3. Reisinger, Markus & Thomes, Tim Paul, 2017. "Manufacturer collusion: Strategic implications of the channel structure," DICE Discussion Papers 261, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    4. J. Mark Ramseyer & Eric Rasmusen, 2013. "Exclusive Dealing: Before Bork, and Beyond," Working Papers 2013-11, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    5. Graham Mallard, 2014. "Static Common Agency And Political Influence: An Evaluative Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 28(1), pages 17-35, February.
    6. repec:kap:jincot:v:18:y:2018:i:1:d:10.1007_s10842-017-0251-6 is not listed on IDEAS
    7. Gangshu (George) Cai & Yue Dai & Sean X. Zhou, 2012. "Exclusive Channels and Revenue Sharing in a Complementary Goods Market," Marketing Science, INFORMS, vol. 31(1), pages 172-187, January.
    8. Chrysovalantou Milliou & Joel Sandonis, 2018. "Manufacturer Mergers and Product Variety in Vertically Related Markets," Journal of Industry, Competition and Trade, Springer, vol. 18(1), pages 1-24, March.
    9. Liu, Weihua & Liu, Yang & Zhu, Donglei & Wang, Yijia & Liang, Zhicheng, 2016. "The influences of demand disruption on logistics service supply chain coordination: A comparison of three coordination modes," International Journal of Production Economics, Elsevier, vol. 179(C), pages 59-76.
    10. Xia, Yu, 2011. "Competitive strategies and market segmentation for suppliers with substitutable products," European Journal of Operational Research, Elsevier, vol. 210(2), pages 194-203, April.
    11. Tom Murphy & Greg Walker & John Hicks, 1996. "Promoting Efficiency and Competition in Rural Petrol Markets," Agenda - A Journal of Policy Analysis and Reform, Australian National University, College of Business and Economics, School of Economics, vol. 3(4), pages 441-448.

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