Are Market-Share Contracts a Poor Man’s Exclusive Dealing?

Zhijun Chen and Greg Shaffer

No 44-16, Monash Economics Working Papers from Monash University, Department of Economics

Abstract: Contracts that reference rivals have long been a focus of antitrust law and the subject of intense scholarly debate. This paper compares two such contracts, exclusive-dealing contracts and market-share contracts, in a model of naked exclusion. We discuss the different mecha-nisms through which each works and identify the fundamental tradeoff that arises: market-share contracts are better at maximizing a seller’s benefit from foreclosure whereas exclusive dealing is better at minimizing a seller’s cost of foreclosure. We give settings in which each is the more profitable contract and show that welfare can be worse with market-share contracts.

Keywords: Exclusive dealing; Market-share contracts; Dominant Firm; Foreclosure (search for similar items in EconPapers)
JEL-codes: D86 K21 L13 L41 L42 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2016-11
New Economics Papers: this item is included in nep-com, nep-cta, nep-ind, nep-law and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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