The Effects of Platform Most-Favored-Nation Clauses on Competition and Entry

Andre Boik and Kenneth Corts

Journal of Law and Economics, 2016, vol. 59, issue 1, 105 - 134

Abstract: In the context of sellers who sell their products through intermediary platforms, a platform most-favored-nation (PMFN) clause is a contractual restriction requiring that a particular seller will not sell at a lower price through a platform other than the one with which it has the PMFN agreement. Contractual restrictions observed in markets for e-books and travel services, among other settings, can be viewed as examples of this phenomenon. We show that PMFN clauses typically raise platform fees and retail prices and curtail entry or skew positioning decisions by potential entrants pursuing low-end business models.

Date: 2016
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