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Naked Exclusion : Towards a Behavioral Approach to Exclusive Dealing

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  • Boone, J.

    (Tilburg University, Center For Economic Research)

  • Müller, W.

    (Tilburg University, Center For Economic Research)

  • Suetens, S.

    (Tilburg University, Center For Economic Research)

Abstract

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.

Suggested Citation

  • Boone, J. & Müller, W. & Suetens, S., 2009. "Naked Exclusion : Towards a Behavioral Approach to Exclusive Dealing," Discussion Paper 2009-30, Tilburg University, Center for Economic Research.
  • Handle: RePEc:tiu:tiucen:6613eb2c-6339-48e1-b940-64ea91eba827
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    Cited by:

    1. Kitamura Hiroshi, 2011. "Exclusive Contracts under Financial Constraints," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-31, September.
    2. Laura Nurski & Frank Verboven, 2016. "Exclusive Dealing as a Barrier to Entry? Evidence from Automobiles," Review of Economic Studies, Oxford University Press, vol. 83(3), pages 1156-1188.
    3. Jan Boone & Wieland Müller & Sigrid Suetens, 2014. "Naked Exclusion in the Lab: The Case of Sequential Contracting," Journal of Industrial Economics, Wiley Blackwell, vol. 62(1), pages 137-166, March.
    4. Jon X. Eguia & Aniol Llorente-Saguer & Rebecca Morton & Antonio Nicol�, 2014. "Equilibrium Selection in Sequential Games with Imperfect Information," Working Papers 717, Queen Mary University of London, School of Economics and Finance.
    5. Cason, Timothy N. & Mui, Vai-Lam, 2015. "Rich communication, social motivations, and coordinated resistance against divide-and-conquer: A laboratory investigation," European Journal of Political Economy, Elsevier, vol. 37(C), pages 146-159.
    6. Moellers, Claudia & Normann, Hans-Theo & Snyder, Christopher M., 2017. "Communication in vertical markets: Experimental evidence," International Journal of Industrial Organization, Elsevier, vol. 50(C), pages 214-258.
    7. Hiroshi Kitamura & Misato Sato & Koki Arai, 2014. "Exclusive contracts when the incumbent can establish a direct retailer," Journal of Economics, Springer, vol. 112(1), pages 47-60, May.
    8. Fonseca, Miguel A. & Li, Yan & Normann, Hans-Theo, 2018. "Why factors facilitating collusion may not predict cartel occurrence: Experimental evidence," DICE Discussion Papers 289, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    9. repec:dpr:wpaper:0878 is not listed on IDEAS
    10. Normann, Hans-Theo & Möllers, Claudia & Snyder, Christopher M., 2015. "Communication in Vertically Related Markets: Experimental Evidence," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112842, Verein für Socialpolitik / German Economic Association.
    11. repec:eee:gamebe:v:109:y:2018:i:c:p:465-483 is not listed on IDEAS
    12. Zhijun Chen & Greg Shaffer, 2014. "Naked exclusion with minimum-share requirements," RAND Journal of Economics, RAND Corporation, vol. 45(1), pages 64-91, March.
    13. Christoph March & Robert K. von Weizsäcker, 2016. "Coordinating Intergenerational Redistribution and the Repayment of Public Debt," CESifo Working Paper Series 6075, CESifo Group Munich.

    More about this item

    Keywords

    exclusive dealing; entry deterrence; foreclosure; contracts; externalities; coordination; experiments;

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts

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