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Exclusive Dealing

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  • Bernheim, B.D.

Abstract

February 1996 (Last Version: December 1992) In this paper, we provide a conceptual framework for understanding the phenomenon of exclusive dealing, and we explore the motivations for and effects of its use. For a broad class of models, we characterize the outcome of a contracting game in which manufacturers may employ exclusive dealing provisions in their contracts. We then apply this characterization to a sequence of specialized settings. We demonstrate that exclusionary contractual provisions may be irrelevant, anticompetitive, or efficiency-enhancing, depending upon the setting. More specifically, we exhibit the potential for anticompetitive effects in non-coincident markets (that is, markets other than the ones in which exclusive dealing is practiced), and we explore the potential for the enhancement of efficiency in a setting where common representation gives rise to incentive conflicts. In each instance, we describe the manner in which equilibrium outcomes would be altered by a ban on exclusive dealing. We demonstrate that a ban may have surprisingly subtle and unintended effects.
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Suggested Citation

  • Bernheim, B.D., 1992. "Exclusive Dealing," Harvard Institute of Economic Research Working Papers 1622, Harvard - Institute of Economic Research.
    • Handle: RePEc:fth:harver:1622
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    JEL classification:

    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts

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