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Exclusionary Contracts

Author

Listed:
  • Ran Jing
  • Ralph A. Winter

Abstract

When have market participants the incentive to strike contracts that exclude potential entrants? This article synthesizes the theory of exclusionary contracts and applies the theory to a recent antitrust case, Nielsen. We consider an incumbent facing potential entry and contracting with both upstream suppliers and downstream buyers. Focusing first on contracts with downstream buyers, we set out a "Chicago benchmark" set of assumptions that yields no incentive for exclusionary contracts. Departing from the benchmark in each of three directions yields a theory of exclusion. These include the two existing theories, developed by Aghion and Boulton and by Rasmusen, Ramseyer and Wiley. The structure also captures a third, vertical theory: long-term contracts at one stage of a supply chain can extract rents from a firm with market power at another stage. Turning to upstream contracts, we offer a theory of simultaneous contract offers that generalizes the "Colonel Blotto" game. Nielsen illustrates the full range of the predictions of the theories of exclusionary contracts. (JEL L14, K21, L23)

Suggested Citation

  • Ran Jing & Ralph A. Winter, 2014. "Exclusionary Contracts," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 30(4), pages 833-867.
    • Handle: RePEc:oup:jleorg:v:30:y:2014:i:4:p:833-867.
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    File URL: http://hdl.handle.net/10.1093/jleo/ewt015
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    Citations

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    Cited by:

    1. Philippe Choné & Laurent Linnemer, 2016. "Nonlinear pricing and exclusion:II. Must-stock products," RAND Journal of Economics, RAND Corporation, vol. 47(3), pages 631-660, August.
    2. Jihui Chen & Qiang Fu, 2017. "Do exclusivity arrangements harm consumers?," Journal of Regulatory Economics, Springer, vol. 51(3), pages 311-339, June.
    3. Fadairo, Muriel & Yu, Jianyu & Lanchimba, Cintya, 2017. "The Choice of Exclusive Dealing: Economic Rationales and Evidence from French Retail Chains," Journal of Retailing, Elsevier, vol. 93(3), pages 317-335.

    More about this item

    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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