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The Role Of Exclusive Contracts In Facilitating Market Transactions

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  • NIKO MATOUSCHEK
  • PAOLO RAMEZZANA

Abstract

We examine the relationship between market conditions and the adoption of exclusive contracts. In particular, we develop a matching model in which agents may decide to adopt exclusive contracts to reduce bilateral bargaining inefficiencies in the presence of private information. We show that it is optimal for agents to adopt exclusive contracts in thin markets but not in thick markets and that for intermediate levels of market thickness strategic complementarities lead to multiple equilibria. We study the welfare properties of market equilibria and discuss under what circumstances courts should enforce exclusive contracts.

Suggested Citation

  • Niko Matouschek & Paolo Ramezzana, 2007. "The Role Of Exclusive Contracts In Facilitating Market Transactions," Journal of Industrial Economics, Wiley Blackwell, vol. 55(2), pages 347-371, June.
    • Handle: RePEc:bla:jindec:v:55:y:2007:i:2:p:347-371
    DOI: 10.1111/j.1467-6451.2007.00314.x
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    References listed on IDEAS

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    1. Yeon-Koo Che & Jozsef Sakovics, 2004. "Contractual Remedies to the Holdup Problem: A Dynamic Perspective," Edinburgh School of Economics Discussion Paper Series 100, Edinburgh School of Economics, University of Edinburgh.
    2. David de Meza & Mariano Selvaggi, 2004. "Exclusive Contracts Foster Relationship-Specific Investment," The Centre for Market and Public Organisation 04/105, The Centre for Market and Public Organisation, University of Bristol, UK.
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    Cited by:

    1. Thomas F. Hellmann & Veikko Thiele, 2012. "A Theory of the Firm based on Partner Displacement," NBER Working Papers 18495, National Bureau of Economic Research, Inc.
    2. Emanuele Bacchiega & Olivier Bonroy & Emmanuel Petrakis, 2018. "Contract contingency in vertically related markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 27(4), pages 772-791, October.
    3. Daniel Ripperger-Suhler, 2024. "Matching with Nonexclusive Contracts," Games, MDPI, vol. 15(2), pages 1-39, March.
    4. Masaki Nakabayashi, 2018. "From the substance to the shadow: the role of the court in Japanese labour markets," Economic History Review, Economic History Society, vol. 71(1), pages 267-289, February.
    5. Xinyu Hua, 2007. "Strategic ex ante contracts: rent extraction and opportunity costs," RAND Journal of Economics, RAND Corporation, vol. 38(3), pages 786-803, September.
    6. NAKABAYASHI, Masaki, 2014. "From the Substance to the Shadow: The Court Embedded into Japanese Labor Markets," ISS Discussion Paper Series (series F) f168, Institute of Social Science, The University of Tokyo, revised 28 Mar 2014.
    7. Holland, Daniel S. & Jannot, Jason E., 2012. "Bycatch risk pools for the US West Coast Groundfish Fishery," Ecological Economics, Elsevier, vol. 78(C), pages 132-147.
    8. Guo, Di & Hua, Xinyu & Jiang, Kun, 2017. "Agency and strategic contracts: Theory and evidence from R&D agreements in the pharmaceutical industry," International Journal of Industrial Organization, Elsevier, vol. 54(C), pages 37-64.
    9. NAKABAYASHI, Masaki, 2009. "Poaching, Courts, and Settlements:Complementarity of Governance in Labor Markets," ISS Discussion Paper Series (series F) f145, Institute of Social Science, The University of Tokyo, revised 01 Mar 2012.
    10. Matouschek, Niko & Ramezzana, Paolo & Robert-Nicoud, Frédéric, 2009. "Labor market reforms, job instability, and the flexibility of the employment relationship," European Economic Review, Elsevier, vol. 53(1), pages 19-36, January.
    11. Gielens, Katrijn & Gijsbrechts, Els & Dekimpe, Marnik G., 2014. "Gains and losses of exclusivity in grocery retailing," International Journal of Research in Marketing, Elsevier, vol. 31(3), pages 239-252.
    12. Andritsos, Dimitrios A. & Tang, Christopher S., 2010. "Launching new products through exclusive sales channels," European Journal of Operational Research, Elsevier, vol. 204(2), pages 366-375, July.
    13. Hua, Xinyu, 2012. "The right of first offer," International Journal of Industrial Organization, Elsevier, vol. 30(4), pages 389-397.
    14. Avcioglu, Sahin & Karabay, Bilgehan, 2019. "Search efficiency, wage dynamics and welfare," Economic Modelling, Elsevier, vol. 83(C), pages 270-286.

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