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Exclusionary Vertical Restraints and Antitrust: Experimental Law and Economics Contributions

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  • Landeo, Claudia

    () (University of Alberta, Department of Economics)

Abstract

Vertical restraints have been subject of lively policy and academic discussions. Scholars associated with the Chicago School challenged early foreclosure doctrines by arguing that vertical restraints primarily reflected efficiency considerations. More recently, industrial organization economists have used the tools of game theory and information economics to showth at these business practices might actually serve anticompetitive purposes. The influence of the new economic theories on antitrust policies has been limited by the complexity of the models and the scarcity of empirical evidence. Experimental law and economics might advance the knowledge of the factors that affect the anticompetitive effects of vertical restraints. Hence, it might strengthen the contributions of academic work to the design and implementation of antitrust policies. This chapter is intended to contribute to the discussion of the exclusionary effects of vertical restraints, and the role of experimental law and economics in antitrust law. Special attention is devoted to vertical integration, exclusive dealing contracts, and tying and bundling practices. Although the experimental literature on exclusionary vertical restraints is relatively recent, the findings from these studies provide important insights. First, this research indicates that vertical restraints might indeed be used as market foreclosure mechanisms. Second, this work identifies previously non-modeled factors that might influence the effects of these business practices. My analysis underscores the importance of combining experimental and behavioral observation with theoretical modeling.

Suggested Citation

  • Landeo, Claudia, 2012. "Exclusionary Vertical Restraints and Antitrust: Experimental Law and Economics Contributions," Working Papers 2012-24, University of Alberta, Department of Economics.
  • Handle: RePEc:ris:albaec:2012_024
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    File URL: https://sites.ualberta.ca/~econwps/2012/wp2012-24.pdf
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    References listed on IDEAS

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    1. Davis, Douglas D. & Holt, Charles a., 1993. "Experimental economics: Methods, problems and promise," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 8(2), pages 179-212.
    2. Landeo, Claudia M., 2009. "Cognitive coherence and tort reform," Journal of Economic Psychology, Elsevier, vol. 30(6), pages 898-912, December.
    3. Richard R. W. Brooks & Claudia M. Landeo & Kathryn E. Spier, 2010. "Trigger happy or gun shy? Dissolving common-value partnerships with Texas shootouts," RAND Journal of Economics, RAND Corporation, vol. 41(4), pages 649-673.
    4. A. Mitchell Polinsky & Steven Shavell (ed.), 2007. "Handbook of Law and Economics," Handbook of Law and Economics, Elsevier, edition 1, volume 2, number 2.
    5. 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 1850-1877, December.
    6. Crawford, Vincent, 1998. "A Survey of Experiments on Communication via Cheap Talk," Journal of Economic Theory, Elsevier, vol. 78(2), pages 286-298, February.
    7. Patrick Bolton & Michael D. Whinston, 1993. "Incomplete Contracts, Vertical Integration, and Supply Assurance," Review of Economic Studies, Oxford University Press, vol. 60(1), pages 121-148.
    8. Claudia M. Landeo & Kathryn E. Spier, 2012. "Exclusive Dealing and Market Foreclosure: Further Experimental Results," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 168(1), pages 150-170, March.
    9. Timothy N. Cason & Tridib Sharma, 2001. "Durable Goods, Coasian Dynamics, and Uncertainty: Theory and Experiments," Journal of Political Economy, University of Chicago Press, vol. 109(6), pages 1311-1354, December.
    10. Anil Caliskan & David Porter & Stephen Rassenti & Vernon L. Smith & Bart J. Wilson, 2007. "Exclusionary Bundling and the Effects of a Competitive Fringe," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 163(1), pages 109-132, March.
    11. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, January.
    12. Duffy, John & Feltovich, Nick, 2002. "Do Actions Speak Louder Than Words? An Experimental Comparison of Observation and Cheap Talk," Games and Economic Behavior, Elsevier, vol. 39(1), pages 1-27, April.
    13. A. Mitchell Polinsky & Steven Shavell (ed.), 2007. "Handbook of Law and Economics," Handbook of Law and Economics, Elsevier, edition 1, volume 1, number 1.
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    Citations

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    Cited by:

    1. Claudia M. Landeo & Kathryn E. Spier, 2016. "Stipulated Damages as a Rent-Extraction Mechanism: Experimental Evidence," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 172(2), pages 235-273, June.
    2. repec:elg:eechap:14176_9 is not listed on IDEAS
    3. Claudia M. Landeo, 2018. "Law and economics and tort litigation institutions: theory and experiments," Chapters,in: Research Handbook on Behavioral Law and Economics, chapter 9, pages 247-268 Edward Elgar Publishing.

    More about this item

    Keywords

    Vertical Restraints; Experimental Law and Economics; Antitrust; Vertical Integration; Exclusive Dealing Contracts; Bundling; Tying; Stipulated Damages; Contract Renegotiation; Non-Monetary Preferences; Payoff Aspirations; Communication; Intentionality; Fairness; Reciprocity; Discrimination; Endogenous Payoffs; Bargaining Games; Coordination Games; Equilibrium Selection; Stackelberg Equilibrium; Cournot Equilibrium; Bertrand Competition; Fringe Competition;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts

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