Star Wars: Exclusive Superstars and Collusive Outcomes
We examine the impact of agreements that prohibit "superstars" from switching their services to rivals on firms' ability to collude. Exclusivity (or non-compete) clauses are not uncommon in the sports,entertainment and professional services industries, but courts often refrain from enforcing them owing to inequity and/or restraint of trade considerations. We argue this attitude may be misguided. While in the collusive path exclusion may be inconsequential because firms agree not to hire each other's star, its enforcement level aspects the severity of future punishments. For exclusive talent may not be poached by rivals. The ability to sustain tacit collusion may thus be impaired, which in plausible constellations leads to efficiency improvements and more equitable distribution of rents.
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