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Coerced Reciprocity And The Leverage Theory

Author

Listed:
  • Kalyn T. Coatney
  • Sherrill Shaffer

Abstract

Recent international mergers have potentially revived interest in a long-standing concern of U.S. courts that, under certain conditions, a conglomerate that buys from and sells products to its intermediary supplier may be able to profitably leverage its downstream market power to restrict competition in the upstream market and harm welfare via coerced reciprocal dealing. Economists have debated the court precedent, invoking the leverage theory established from various models of tying arrangements, a cousin of coerced reciprocal dealing. We develop the first explicit model of coerced reciprocal dealings to investigate the validity of the leverage theory. Our results support the concerns.

Suggested Citation

  • Kalyn T. Coatney & Sherrill Shaffer, 2013. "Coerced Reciprocity And The Leverage Theory," Journal of Competition Law and Economics, Oxford University Press, vol. 9(2), pages 473-493.
    • Handle: RePEc:oup:jcomle:v:9:y:2013:i:2:p:473-493.
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    File URL: http://hdl.handle.net/10.1093/joclec/nht007
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    More about this item

    JEL classification:

    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L49 - Industrial Organization - - Antitrust Issues and Policies - - - Other

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