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Naked exclusion: Towards a behavioral approach to exclusive dealing

  • Boone, Jan
  • Müller, Wieland
  • Suetens, Sigrid

We report experimental results on exclusive dealing inspired by the literature on "naked exclusion.'' Our key findings are: First, exclusion of a more efficient entrant is a widespread phenomenon in lab markets. Second, allowing incumbents to discriminate between buyers increases exclusion rates compared to the non-discriminatory case only when payments to buyers can be offered sequentially and secretly. Third, allowing discrimination does not lead to significant decreases in costs of exclusion. Accounting for the observation that buyers are more likely to accept an exclusive deal the higher is the payment, substantially improves the fit between theoretical predictions and observed behavior.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7303.

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Date of creation: May 2009
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Handle: RePEc:cpr:ceprdp:7303
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  1. David Spector, 2007. "Exclusive contracts and demand foreclosure," PSE Working Papers halshs-00588311, HAL.
  2. Chiara Fumagalli & Massimo Motta & Thomas Rønde, 2009. "Exclusive Dealing: The Interaction between Foreclosure and Investment Promotion," Working Papers 2009.120, Fondazione Eni Enrico Mattei.
  3. repec:cup:cbooks:9780521016919 is not listed on IDEAS
  4. Chiara Fumagalli & Massimo Motta, 2006. "Exclusive Dealing and Entry, when Buyers Compete," American Economic Review, American Economic Association, vol. 96(3), pages 785-795, June.
  5. Fumagalli, Chiara & Motta, Massimo & Persson, Lars, 2005. "Exclusive Dealing, Entry and Mergers," CEPR Discussion Papers 4902, C.E.P.R. Discussion Papers.
  6. John C. Harsanyi & Reinhard Selten, 1988. "A General Theory of Equilibrium Selection in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582384, June.
  7. Claudia M. Landeo & Kathryn E. Spier, 2009. "Naked Exclusion: An Experimental Study of Contracts with Externalities," American Economic Review, American Economic Association, vol. 99(5), pages 1850-77, December.
  8. David Spector, 2011. "Exclusive contracts and demand foreclosure," RAND Journal of Economics, RAND Corporation, vol. 42(4), pages 619-638, December.
  9. Robert Slonim & Alvin E. Roth, 1998. "Learning in High Stakes Ultimatum Games: An Experiment in the Slovak Republic," Econometrica, Econometric Society, vol. 66(3), pages 569-596, May.
  10. David Besanko & Martin K. Perry, 1993. "Equilibrium Incentives for Exclusive Dealing in a Differentiated Products Oligopoly," RAND Journal of Economics, The RAND Corporation, vol. 24(4), pages 646-668, Winter.
  11. Battalio, Raymond & Samuelson, Larry & Van Huyck, John, 2001. "Optimization Incentives and Coordination Failure in Laboratory Stag Hunt Games," Econometrica, Econometric Society, vol. 69(3), pages 749-64, May.
  12. Frank Heinemann & Rosemarie Nagel & Peter Ockenfels, 2004. "Measuring strategic uncertainty in coordination games," Economics Working Papers 804, Department of Economics and Business, Universitat Pompeu Fabra.
  13. Sass, Tim R., 2005. "The competitive effects of exclusive dealing: Evidence from the U.S. beer industry," International Journal of Industrial Organization, Elsevier, vol. 23(3-4), pages 203-225, April.
  14. repec:cup:cbooks:9780521816632 is not listed on IDEAS
  15. Michael D. Whinston & Ilya R. Segal, 2000. "Naked Exclusion: Comment," American Economic Review, American Economic Association, vol. 90(1), pages 296-309, March.
  16. McAfee, R Preston & Schwartz, Marius, 1994. "Opportunism in Multilateral Vertical Contracting: Nondiscrimination, Exclusivity, and Uniformity," American Economic Review, American Economic Association, vol. 84(1), pages 210-30, March.
  17. Aghion, Philippe & Bolton, Patrick, 1987. "Contracts as a Barrier to Entry," American Economic Review, American Economic Association, vol. 77(3), pages 388-401, June.
  18. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
  19. Schmidt, David & Shupp, Robert & Walker, James M. & Ostrom, Elinor, 2003. "Playing safe in coordination games:: the roles of risk dominance, payoff dominance, and history of play," Games and Economic Behavior, Elsevier, vol. 42(2), pages 281-299, February.
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