Exclusive Contracts And Market Power: Evidence From Ocean Shipping

Pedro L. Marín and Richard Sicotte

Journal of Industrial Economics, 2003, vol. 51, issue 2, 193-214

Abstract: There is a substantial theoretical literature on the potential effects of loyalty contracts, but relatively little empirical work. We employ the event study methodology to examine the competitive effects of exclusionary contracts in the ocean shipping industry, where they were the subject of an extended legal and political struggle. We find that some of the most important events in this conflict caused significant changes in shipping firms' stock returns, indicating exclusive contracts increased their profits. We then examine the effect of these events on net exporting industries' stock returns, and provide evidence that these contracts contributed to carriers' market power.

Date: 2003
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