fishing effort its testing specification and internal structure in fisheries economics and management abstract the concept of fishing effort is central to fisheries economics and management however effort is an aggregate index of inputs which can be consistently formed only under the condition on production technology of homothetic separability of inputs this paper develops the conditions under which effort can be consistently formed it then provides the first empirical test for effort and jointness in inputs in a fishery by estimating a multiproduct function for the new england otter trawl fleet after not rejecting input output separability and rejecting nonjointness in inputs the construction of a superlative index for effort is demonstrated through estimating a translog production function the implications of effort s internal structure for fisheries management are then considered

estimating the foreclosure effect of exclusive dealing evidence from the entry of specialty beer producers this paper estimates an entry model to study the effect of exclusive dealing between anheuser busch and its distributors on rival brewers entry decisions and consumer surplus the entry model accounts for post entry demand conditions and strategic spillover effects i recover a brewer s fixed costs using a two step estimator and find spillover effects on brewers entry decisions i find that a brewer has higher fixed costs at locations where anheuser busch employ exclusive distributors but the effect is only statistically significant in certain local areas the estimates also show that a brewer is less likely to enter a location that is farther from its brewery has lower expected demand or is smaller in store size i implement counterfactual experiments to study the effect of banning exclusive contracts between anheuser busch and its distributors the results show that the welfare improvement associated with banning such contracts is very small

contracts as a barrier to entry it is shown that an incumbent seller who faces a threat of entry into his or her market will sign long term contracts that prevent the entry of some lower cost producers even though they do not preclude entry completely moreover when a seller possesses superior information about the likelihood of entry it is shown that the length of the contract may act as a signal of the true probability of entry

exclusive contracts and protection of investments we consider the effect of a renegotiable exclusive contract restricting a buyer to purchase from only one seller on the levels of noncontractible investments undertaken in their relationship contrary to some informal claims in the literature we find that exclusivity has no effect when all investments are fully specific to the relationship i e are purely internal exclusivity does matter when investments affect the value of the buyer s trade with other sellers i e have external effects we examine the effects of exclusivity on investments and aggregate welfare and the private incentives of the buyer seller coalition to use it

tying as a response to demand uncertainty this article examines requirements tying of a competitively supplied good to a monopolized good it expands the set of market conditions in which this instrument is known to be profitable with heterogeneous privately informed buyers a firm can profit by tying two goods even when demands for the goods are price independent providing the demands are stochastically dependent we investigate the profitability of tying as a response to stochastic demand as well as the effects of tying on prices and the extent of the market served

resale price maintenance and collusion the article revisits the conventional wisdom according to which vertical restrictions on retail prices help upstream firms to collude we analyze the scope for collusion with and without resale price maintenance rpm when retailers observe local shocks on demand or retail costs in the absence of rpm retail prices react to retailers information and deviations from collusive behavior are thus difficult to detect by eliminating retail price flexibility rpm facilitates the detection of deviations but reduces profits and thus increases the short run gains from a deviation overall rpm can facilitate collusion and reduce total welfare when firms adopt it

backward stealing and forward manipulation in the wto abstract motivated by the structure of wto negotiations we analyze a bargaining environment in which negotiations proceed bilaterally and sequentially under the most favored nation mfn principle we identify backward stealing and forward manipulation problems that arise when governments bargain under the mfn principle in a sequential fashion we show that these problems impede governments from achieving the multilateral efficiency frontier unless further rules of negotiation are imposed we identify the wto nullification or impairment and renegotiation provisions and its reciprocity norm as rules that are capable of providing solutions to these problems in this way we suggest that wto rules can facilitate the negotiation of efficient multilateral trade agreements in a world in which the addition of new and economically significant countries to the world trading system is an ongoing process

the principal agent relationship with an informed principal ii common values in many circumstances a principal may have relevant private information when she proposes a contract to an agent we analyze such a principal agent relationship as a noncooperative game the principal proposes a contract which is accepted or rejected by the agent who for most of our analysis has no private information the contract is executed if accepted otherwise the reservation allocation takes effect this allocation may be determined by a pre existing contract which the principal by her proposal is attempting to renegotiate or it may simply be the no trade point in this paper we assume that the principal s information directly affects the agent s payoff before solving the game we discuss pareto efficiency with asymmetric information we define an incentive compatible allocation to be weakly interim efficient wie if there exists no alternative incentive compatible allocation that both parties prefer for all possible beliefs that the agent might have about the principal s private information type we show that any wie allocation is interim efficient ie for some beliefs the rothschild stiglitz wilson rsw allocation relative to the reservation allocation l is the allocation that maximizes the payoff of each type of principal within the class of incentive compatible allocations that guarantee the agent at least the utility he gets from a irrespective of his beliefs about the principal s type the equilibrium set of the contract proposal game consists of the allocations that weakly pareto dominate the rsw allocation thus there is a unique equilibrium outcome if and only if the latter is ie and the equilibrium outcome is the rsw allocation itself after characterizing the equilibrium allocations we study those that are renegotiation proof when either the principal or the agent leads the renegotiation we then compare our contract proposal game which is a signaling model with its screening counterpart we conclude by extending our results to the case in which the agent as well as the principal has private information under the assumption of quasi linear preferences

nonlinear pricing and exclusion ii must stock products dominant firms often are unavoidable trading partners buyers may consider switching a fraction of their requirements to rival products but that fraction is highly uncertain in rapidly evolving industries nonlinear pricing serves to adjust the competitive pressure placed on rival firms depending on the joint distribution of the buyer willingness to pay for the rival s good and the share of contestable demand concave price quantity schedules erect barriers to entry convex parts in schedules introduce barriers to expansion dominant firms use all units discounts to create high entry barriers for rival firms with intermediate levels of contestable demand

exclusionary pricing when scale matters we consider an incumbent firm and a more efficient entrant both offering a network good to several asymmetric buyers and both being able to price discriminate the good has positive value to buyers only if the network size exceeds a certain threshold the incumbent s installed base guarantees this critical size to the incumbent while the entrant needs to attract enough new buyers to meet this threshold we show that price discrimination in the various forms it may take reduces the set of achievable socially efficient entry equilibria and discuss the policy implications of this result

incentives for unaware agents the paper introduces the problem of unawareness into principalagent theory and discusses optimal incentive contracts when the agent may be unaware of her action space depending on the agent s default behavior it can be optimal for the principal to propose an incomplete contract that keeps the agent unaware or a complete contract the key tradeoff is that of enlarging the agent s choice set versus adding costly incentive constraints if agents differ in their unawareness optimal contracts show a self reinforcing pattern if there are few unaware agents in the economy optimal contracts promote awareness if unawareness is wide spread optimal contracts shroud the contracting environment thus keeping the agent unaware

the value of embedded real options evidence from consumer automobile lease contracts under the common assumption of constant interest rates we show that penalties for early termination of a lease are often structured in such a way that the cancellation option embedded in consumer automotive leases has little value furthermore our estimates drawn from a sample of three popular car models over 1990 to 2000 indicate that the stand alone value of the lease end purchase option is on average about 16 of the market value of underlying used vehicles or about 1 462 per contract finally we examine the sensitivity of our option value estimates to model parameters and default risk recent years have witnessed a dramatic growth in the leasing of automobiles for instance overall industry sales data indicate that about a third of the new vehicles and trucks sold in the united states are leased hendel and lizzeri 2002 and miller 1995 and the federal reserve board survey of family finances reports that the use of leased vehicles by individuals nonbusiness consumers has risen from 2 9 to 5 8 over the 1992 to 2001 period azicorbe kennickell and moore 2003 consumer automobile lease contracts for new cars often include two embedded options that are not associated with a typical debt contract the first is a cancellation option that allows the lessee to terminate the lease early the second is a european call option which gives the lessee the right but not the obligation to purchase the leased used vehicle at the scheduled termination of the lease at a predetermined exercise price both of these options are simple examples of real options because the asset underlying these options is a used car that is a real asset however these options constitute a special case of real options since they are embedded in the lease contract which is a financial credit instrument theoretical analyses of lease contracts show that the cancellation option is quite valuable schallheim and mcconnell 1985 with respect to the purchase option hendel and lizzeri 2002 argue that they can play an important role in

exclusionary pricing in markets with interdependent demands in this paper i use a simple model to study the competitive effects of exclusionary pricing involving two markets related by a positive demand externality it is shown that below cost pricing on one of these markets can allow an incumbent firm to exclude from both markets a more efficient rival which does not have a customer base yet however when exclusion occurs it is always socially optimal in addition under some circumstances there is inefficient entry the entrant wins both markets while the social optimum would require the incumbent to win them

golden cages for showy birds optimal switching costs in labor contracts under what circumstances do workers sign contracts with high quitting penalties our answer points to market transparency when the worker s performance is privately observed by the incumbent 4rm alternative employers face an adverse selection problem as a result e7cient separations can only take place through involuntary layo8s and there is no role for quitting fees in contrast when performance is public quitting fees are useful devices to appropriate the surplus from workers reallocation separations are amicable and take the form of quitting after downwardly renegotiating the fees qualitative features of contracts are independent of the distribution of ex post bargaining power the impact of switching costs on total welfare and its distribution depends on the degree of market transparency and the ex ante distribution of market power c

exclusionary vertical contracts and product market competition this article considers whether a monopolist is able to deter more efficient entrants through contracting with buyers in the antitrust literature the chicago school s stand is that such contracts cannot be anticompetitive hence vertical contracts should be accorded per se legal status in a four stage game with the following features 1 the incumbent enjoys a first mover advantage 2 the entrant must incur some sunk cost to enter the market and 3 entry is uncertain the author shows that vertical contracts can be anticompetitive if there exists product market competition thus the author advocates caution in treating all contracts as per se legal a three factor repeated measures experiment tested the effect of leadership style charismatic structuring and considerate on performance improvement on a manufacturing task over four trials findings from a repeated measures multivariate analysis of variance indicated that individual exposed to considerate leadership had superior initial performance but that this difference faded over time further analysis indicated that self efficacy fully mediated the relationship between leadership style and performance copyright 1999 by university of chicago press

vertical foreclosure with the choice of input specifications we develop an equilibrium model of vertical foreclosure with the choice of input specifications vertical foreclosure occurs as the upstream division of the integrated firm makes a specialized input for its sister downstream division while it would as an independent firm provide a generalized input the changes in incentives with vertical integration can be explained by the externalities the choice of a specialized input entails vertical integration allows the upstream firm to internalize the benefit of raising the rival firm s costs at the downstream level we derive conditions for equilibrium vertical foreclosure to occur and discuss its welfare consequences

an equilibrium selection theory of monopolization we develop a duopoly model in which firms compete for the market e g investing in process innovation or product development as well as in the market e g setting quantities or prices competition for the market generates multiple equilibria that differ in the firms investment levels relative size and profitability we show that monopolization that affects competition in the market can act as an equilibrium selection device in competition for the market in particular it eliminates equilibria that are undesirable for the monopolizing firm while not generating new equilibria this result complicates the task of determining whether a firm s dominance in a given market is the result of fair competition or unlawful monopolization we discuss a number of implications for antitrust policy and litigation and illustrate these by means of two well known antitrust cases

collusion exclusion and inclusion in random order bargaining this paper examines the profitability of three types of integration in a cooperative game solved by a random order value e g the shapley value collusion between players i and j is a contract merging their resources in the hands of one of them say i this contract can be represented as a combination of exclusion which lets i exclude j s resource but not use it himself and inclusion which lets i use j s resource but not exclude j from it this representation yields a third difference condition on the characteristic function that determines the profitability of collusion generalizing existing results for specific games namely collusion is profitable unprofitable when the complementarity of the colluding players is reduced increased by other players

loyalty discounts and price cost tests abstract we analyze by means of a formal economic model the use of the discount attribution test to assess the competitive effects of loyalty discounts the discount attribution test is a variant of the price cost test where the discount is attributed only to the share of total demand that is regarded as effectively contestable in the model a dominant firm enjoys a competitive advantage over its rivals and uses market share discounts to boost the demand for its own products in this framework we show that the attribution test is misleading or at best completely uninformative our results cast doubts on the applicability of price cost tests to loyalty discount cases

cagan s hypothesis and the first nationwide inflation of paper money in world history more than 25 years ago phillip cagan proposed the hypothesis that the demand for real cash balances depended mainly on the expected rate of inflation provided that the monetary sector was sufficiently isolated from changes in the real sector cagan 1956 to test his hypothesis cagan studied seven hyperinflations in modern europe during which variations in the real variables were negligible compared with the astronomical increases in prices it is well known that he got confirmatory results from his studies however until recently it has not been realized that the same hypothesis is also strongly supported by data from a very different socioeconomic context namely the first nationwide inflation of paper money in world history paper money was invented in china in the northern suing dynasty a d 960 1126 and widely used in the southern sung dynasty a d 1127 1278 the first inflation on a national scale occurred from around 1190 to the end of the dynasty when the monetary system collapsed in this inflation period available historical records do not suggest significant expansion of the economy or important changes in real income modern financial assets such as bonds and equities did

exclusive dealing investment promotion may facilitate inefficient foreclosure this paper studies a model whereby exclusive dealing ed can both promote investment and foreclose a more efficient supplier since ed promotes the incumbent seller s investment the seller and the buyer realize a greater surplus from bilateral trade under exclusivity hence the parties involved may sign an ed contract that excludes a more efficient entrant in circumstances where ed would not arise absent investment the paper therefore invites a more cautious attitude towards accepting possible investment promotion arguments as a defense for ed

presidential address antitrust restrictions on single firm strategies this article offers an overview of selected developments in the law and economics of antitrust regulation of single firm strategies the strategy generating the most cases historically is resale price maintenance here the law has moved sharply in both canada and the u s towards more solid economic foundations yet a gap between the law and economics remains the economics of resale price maintenance is reviewed within a framework that is much simpler and more general than the existing literature the law on a second strategy predatory pricing represents in my view a success story for the influence of economic theory in spite of the absence of a single accepted theory of predatory pricing the remaining single firm strategies are concerned largely with the exclusion by a dominant firm of rivals from a market i review with application to cases the two most basic questions concerning exclusionary strategies are exclusionary anticompetitive contracts ever entered into voluntarily by market participants on the other hand is complete or substantial foreclosure of a market through exclusionary strategies necessarily anticompetitive cette allocution presidentielle a l association canadienne d economique presente une vue d ensemble des developpements dans le droit et l economie de la reglementation antitrust sur les strategies d une firme unique la loi sur la strategie qui genere historiquement le plus de cas le maintien du prix de revente a change dramatiquement au canada et aux etats unis et derive vers une politique qui a des assises economiques solides mais il reste un ecart entre le droit et l economie on reexamine l economie du maintien du prix de revente a l aide d un cadre d analyse qui est a la fois plus simple et plus general que ce qui existe dans la litterature specialisee la loi pour ce qui est d une seconde strategie prix d eviction est a mon avis une grande reussite pour la science economique malgre l absence d une seule theorie du prix d eviction generalement acceptee un troisieme ensemble de strategies concerne l exclusion de ses rivaux d un marche par la firme dominante l auteur reexamine avec un recours extensif aux cas les deux questions de base pour ce qui est des strategies d exclusion est ce que les participants sur un marche entrent jamais volontairement dans un arrangement contractuel qui exclut et est anticoncurrentiel d autre part est ce que la saisie complete ou substantielle d un marche par des man uvres d exclusion est necessairement anticoncurrentielle

rebates as incentives to exclusivity we show how rebates or fidelity discounts that take the form of lump sum payments made to retailers can be used by an incumbent manufacturer to achieve exclusivity and to deter the entry of a more efficient rival the results which hold whatever the degree of differentiation between retailers and whatever the cost advantage of the entrant are found despite minimizing asymmetries that may favour the incumbent as such there is no need to introduce buyers disorganization discriminatory offers economies of scale non coincident markets or liquidated damages to find that exclusivity can lead to anti competitive effects

naked exclusion efficient breach and downstream competition previous papers by eric b rasmusen j mark ramseyer and john s wiley jr 1991 and ilya r segal and michael d whinston 2000 argue that exclusive contracts can inefficiently deter entry in the presence of scale economies and multiple buyers we first show that these results no longer hold when buyers are final consumers who can breach these contracts and pay expectation damages we then show however that exclusive contracts can inefficiently deter entry if buyers are downstream competitors even in the absence of scale economies and even if breach is possible

cost benefit analysis and mammographic screening a travel cost approach abstract this study describes the methodology and presents preliminary results of an economic appraisal of a program to use mobile mammographic screening units in rural areas of australia the benefits of the project are measured using the travel cost method since mammograms are a binary good conventional welfare analysis must be modified and discrete choice models used to estimate the demand for screening the results suggest that the level of welfare benefits depends on the distance a town is from the nearest fixed screening unit in the 10 towns studied the economic benefits of mobile screening outweighed the economic costs if a rural town is situated 29 km or more from a fixed mammographic screening unit

exclusive quality exclusive quality in the case of vertically differentiated products bertrand competition at the retail level does not prevent an incumbent upstream firm from using exclusivity contracts to deter the entry of a high quality rival indeed because of differentiation the incumbent s inferior product is not eliminated upon entry due to the resulting competitive pressure a retailer who considers rejecting the exclusivity contract expects to earn much less than the incumbent s monopoly rents thus in equilibrium the incumbent can always offer high enough an upfront payment to induce all retailers to sign the contract and achieve exclusion this is true under linear pricing for intermediate levels of entry costs and with two part tariffs even in the absence of entry costs copyright 2010 the author the journal of industrial economics 2010 blackwell publishing ltd and the editorial board of the journal of industrial economics

the british electricity experiment the privatization of the electricity supply industry esi in britain which began 1990 is in itself an unremarkable event much of the esi is privately owned in several european countries and in the united states and the u k privatization program has embraced utilities since 1984 when british telecom was privatized the thing that is remarkable about recent policy toward the industry is the radical nature of the regulatory reform accompanying privatization a vertically integrated administered generation and transmission structure was replaced overnight on march 31 1990 by one that is deintegrated and market based generation and transmission have been separated and there has been an attempt to establish competition in generation a number of countries have been moving gradually in the direction of encouraging competition but nowhere else have such dramatic changes been implemented so quickly

a signaling based theory of contractual commitment to relationships abstract in this paper i present signaling as an explanation for how and why parties commit to relationships when they initially contract about the terms of those relationships two forms of contractual commitment to a relationship are considered a promise to trade in the future contracted quantity and a promise not to trade with anyone else contracted exclusivity a party is said to commit more to a relationship if it commits initially to trade a higher quantity and or to a higher level of exclusivity i characterize equilibrium contracts and therefore commitment both the ability to signal information through an exclusivity commitment and whether the informed party commits more to the relationship when the relationship is more likely to succeed depend on the source of the asymmetry of information

exclusive dealing and entry when buyers compete rasmusen et al 1991 and segal and whinston 2000 show that an incumbent monopolist might prevent entry of a more efficient competitor by exploiting externalities among buyers we show that their results hold only when downstream competition among buyers is weak under fierce downstream competition if entry took place a free buyer would become more competitive and increase its output and profits at the expense of buyers that sign an exclusive deal with the incumbent anticipating that orders from a single buyer would trigger entry no buyer will sign the exclusive deal and entry will occur this result is robust across different specifications of the game jel k21 l12 l42

termination clauses in partnerships abstract we show that when designing a partnership agreement partner firms may prefer not to specify how to allocate the commonly owned assets should there be an early termination of the contract by not including such a clause firms induce litigation before a court with positive probability firms create this ex post inefficiency in order to increase the levels of non contractible investments i e increase the ex ante efficiency the absence of an asset allocation clause works as a discipline device that mitigates the hold up problem within the partnership in our set up no other contract but that without an asset allocation clause can credibly create an ex post inefficiency

dynamic common agency a general model of dynamic common agency with symmetric information is considered the set of truthful markov perfect equilibrium payoffs is characterized and the efficiency properties of the equilibria are established a condition for the uniqueness of equilibrium payoffs is derived for the static and the dynamic game the payoff is unique if and only if the payoff of each principal coincides with his marginal contribution to the social value of the game the dynamic model is applied to a game of agenda setting

contracts and externalities how things fall apart a single principal interacts with several agents offering them contracts the crucial assumption of this paper is that the outside option payoffs of the agents depend positively on how many uncontracted or free agents there are we study how such a principal unwelcome though he may be approaches the problem of contract provision to agents when coordination failure among the latter group is explicitly ruled out two variants are considered when the principal cannot re approach agents there is a unique equilibrium in which contract provision is split up into two phases in phase 1 simultaneousoffers at good though varying terms are made to a number of agents in phase 2 offers must be made sequentially and their values are discontinuously lower they are close to the very lowest of all the outside options when the principal can repeatedly approach the same agent there is a multiplicity of equilibria in some of these the agents have the power to force delay they can hold off the principal s overtures temporarily but they must succumb in finite time in both models despite beingable to coordinate their actions agents cannot resist an invasion by the principal and hold to their best payoff it is in this sense that things eventually fall apart

naked exclusion an experimental study of contracts with externalities this paper reports the results of an experiment designed to assess the ability of an incumbent seller to profitably foreclose a market with exclusive contracts we use the strategic environment described by rasmusen ramseyer and wiley 1991 and segal and whinston 2000 where entry is unprofitable when sufficiently many downstream buyers sign exclusive contracts with the incumbent when discrimination is impossible the game resembles a stag hunt coordination game in which the buyers payoffs are endogenously chosen by the incumbent seller exclusion occurs when the buyers fail to coordinate on their preferred equilibrium two way non binding pre play communication among the buyers lowers the power of exclusive contracts and induces more generous contract terms from the seller when discrimination and communication are possible the exclusion rate rises divide and conquer strategies are observed more frequently when buyers can communicate with each other exclusion rates are significantly higher when the buyers payoffs are endogenously chosen rather than exogenously given finally secret offers are shown to decrease the incumbent s power to profitably exclude

exclusive contracts and demand foreclosure a firm may induce some customers to sign exclusive contracts in order to deprive a rival of the minimum viable size exclude it from the market and enjoy increased market power this strategy may result in socially inefficient exclusion even if the excluded firm is present at the contracting stage and can make counteroffers in addition allowing for breach penalty clauses decreases firms incentives to exclude rivals because such clauses allow a firm to use customers as a conduit for the transfer of another firm s profits

understanding the soft budget constraint we propose a clarification of the notion of a soft budget constraint a concept widely used in the analysis of socialist transitional and market economies our interpretation is broad enough to embrace most existing approaches to soft budget constraint phenomena and provides a classification of their causes and consequences in light of this interpretation we then review the theoretical literature on the subject and compare it with those on other dynamic commitment problems in economics

contractual signaling relationship specific investment and exclusive agreements i analyze a model of hold up with asymmetric information at the contracting stage the asymmetry of information concerns the value of trade with external parties i show that contractual signaling and efficiency of investment can conflict if only quantity is contractible this conflict generates inefficient equilibria in terms of investment contracting on exclusivity in addition to quantity resolves the conflict and consequently eliminates the inefficiency of investment

can low price guarantees deter entry abstract this paper examines the strategic use of low price guarantees lpgs as an entry deterrent the entire space of contemporaneous lpg messages is partitioned according to their ability to deter entry and or increase the incumbent s profits while most price matching and price beating guarantees cannot deter entry into a perfectly contestable market there do exist special classes of price beating guarantees that enable the incumbent to prevent entry interestingly both price matching and price beating can be a part of the incumbent s strategy in subgame perfect equilibria of the game where the firms choose lpgs from 14 classes defined in the paper

exclusion via non exclusive contracts we establish that non linear vertical contracts can allow an incumbent to exclude an upstream rival in a setting that does not rely on the exclusivity of the incumbent s contracts with downstream firms or any limits on distribution channels available to the incumbent or rival the optimal contract we describe is a three part quantity discounting contract that involves the payment of an allowance to a downstream distributor and a marginal wholesale price below the incumbent s marginal cost for sufficiently large quantities the optimal contract is robust to allowing parties to renegotiate contracts in case of entry l exclusion par le biais des contrats non exclusifs nous etablissons que des contrats verticaux non lineaires peuvent permettre a un titulaire d exclure un rival en amont dans un cadre qui ne de pend pas de l exclusivite des contrats du titulaire avec les entreprises en aval ou des limites sur les canaux de distribution disponibles pour le titulaire ou un rival le contrat optimal que nous decrivons est un contrat de rabais en trois parties base sur la quantite pre voyant le versement d une indemnite a un distributeur en aval et un prix de gros marginal inferieur au cout marginal de l operateur historique pour des quantites suffisamment importantes le contrat optimal est robuste si on permet aux parties de renegocier les contrats en cas d entree

naked exclusion with minimum share requirements we consider a class of contracts in which buyers commit to giving a seller some minimum share of their total purchases we show that such contracts can be used by an incumbent seller to reduce the probability of entry by a rival seller when the incumbent can commit to its selling price as part of the contract we further show that such contracts can be profitable for the incumbent even when exclusive dealing would not be and even when buyers can coordinate their accept or reject decisions the average price paid by the buyers will be higher and welfare will be lower whether or not the incumbent s exclusionary conduct turns out to be successful in preventing entry

time related characteristics of tenancy contracts and investment in soil conservation practices we present a dynamic model that shows how different types of land tenancy contracts and their time related characteristics influence farmers decisions to invest in soil improvement and productive inputs using recent household and plot level data from the brong ahafo region in ghana we analyze the impact of land tenancy arrangements contract duration as well as the number of times the contract has been renewed in the past on the intensity of investment in soil conservation measures such as ditches and farmyard manure and productive inputs like chemical fertilizer the empirical findings generally confirm the predictions of the theoretical model and reveal that the intensity of investments on different plots cultivated by a given farmer varies significantly with the type of tenancy arrangement on the plot as well as the time related characteristics of the contract

career concerns matching and optimal disclosure policy raiders may suffer from information disadvantage since the current employer is often better informed about his workers quality when workers have career concerns and matching influences productivity the initial employer can strategically disclose information to influence incentives and matching efficiency long term complete contracts induce full disclosure when raiders are perfectly competitive the optimal short term contract induces full disclosure if raiders are perfectly competitive and the workers are risk neutral and are not liquidity constrained these conditions are not only sufficient but also almost necessary for full disclosure partial disclosure may be optimal if any of these conditions is relaxed

antitrust transaction costs and merger simulation with nonlinear pricing abstractthis article explores the relationship between transaction costs and antitrust it makes three points first the usual antitrust analysis can be seriously misleading as a guide to consumer or society welfare because it assumes that pricing is linear and uniform but the type of pricing endogenously depends on transaction costs including information costs second two key issues in any antitrust analysis are whether transaction costs change as a result of the action under scrutiny and regardless of whether they change how the existence of nonlinear pricing alters the usual antitrust analysis we develop a merger simulation model with nonlinear pricing to illustrate how misleading the standard analysis can be third since transaction costs influence the ability of various coalitions of consumers distributors and manufacturers to form cooperative game theory can provide a unifying perspective into what situations might give rise to the creation and exploitation of market power

adaptive learning and the transition to fiat money this article explores some implications of adaptive learning for monetary evolution using a search theoretic framework that allows for media of exchange network effects adaptive learning precludes any voluntary transition to a fiat standard from a non monetary state of nature and can account for the historically observed tendency for fiat monetary standards to emerge only following the prior appearance of commodity money and the widespread employment of redeemable banknotes adaptive learning can also account for governments frequent resort to coercive measures to force a switch to fiat money and for their ability to affect such a switch even when doing so is not pareto optimal exchange media fall into the general category of products for which the utility that a user of the good derives from use of the good increases with the number of other agents using the good katz and shapiro 1985 p 424 there are two reasons for these positive network effects 1 indirect the more agents who employ a particular medium of exchange the more likely it is that prices will be quoted in terms of that medium of exchange i e that the medium of exchange will also serve as the economy s principle medium of account the costs of exchange are less for a medium of exchange that trades at par this indirect external effect is analogous to one encountered in computer hardware the more purchasers of a particular kind of hardware the more likely manufacturers of software are to supply compatible products 2 direct the more persons who use a particular exchange medium the better its quality or performance this direct network effect is analogous to one encountered in communications technologies such as telephones the analogy is especially close for fiat money which is useless to an isolated individual this article examines some ways in which media of exchange network effects influence the evolution of monetary standards and especially their role in determining both when and how a transition may occur from barter or commodity money to fiat money the approach taken here emphasises the role of adaptive learning where agents select exchange strategies that reflect static expectations concerning other agents preferred strategies although the exchange game agents play generally has multiple nash equilibria including one in which all agents accept fiat money adaptive learning precludes a spontaneous transition from barter to a fiat monetary standard even where a fiat standard would be welfare enhancing yet such learning does not rule out the spontaneous evolution of a commodity money standard or the eventual substitution of redeemable banknotes for commodity money readers familiar with the literature on network effects will recognise this

the role of potential competition in industrial organization potential competition has been recognized as a mechanism to control the exploitation of market power at least since the work of j b clark 1902 but it was not until 50 years later that economists most notably joe bain and paolo sylos labini refocused attention on the idea with inputs from the theories of imperfect competition optimal control and dynamic games their work evolved into ever more sophisticated models of the reactions of existing competitors to the threat of new competition although the most appropriate models of competitive interaction are those which begin with a specific industry a number of theories have been proposed which attempt to develop more general conclusions my purpose in this paper is to develop an understanding of the strengths and limitations of these alternative theories by examining the available theoretical empirical and institutional knowledge rather than attempt the sisyphean task of recounting every model which relates conditions of entry and market performance i have partitioned the analysis into four major schools of thought according to their most central propositions these are the traditional model of limit pricing dynamic limit pricing the theory of contestable markets and the market efficiency model traditional limit pricing models rest on the assumption that firms respond to entry but are able to earn persistent profits when the structural characteristics of markets make entry difficult dynamic limit pricing is similar but emphasizes that markets can only be temporarily protected from entry contestability theory in its pure form asserts that potential competition is as effective as actual competition in controlling market performance the efficient markets hypothesis broadly interpreted states that markets are workably competitive and that the market structure reflects differential efficiency not strategic behavior while one can construct many other hypotheses about potential competition these classifications

exclusive dealing as a barrier to entry evidence from automobiles exclusive dealing contracts between manufacturers and retailers force new entrants to set up their own costly dealer networks to enter the market we ask whether such contracts may act as an entry barrier and provide an empirical analysis of the european car market we first estimate a demand model with product and spatial differentiation and quantify consumers valuations for dealer proximity and dealer exclusivity we then perform policy counterfactuals to assess the profit incentives and possible entry deterring effects of exclusive dealing we find that there are no unilateral incentives to maintain exclusive dealing but there is a collective incentive for the industry as a whole furthermore a ban on exclusive dealing would raise the smaller entrants market share but more importantly consumers would gain not so much because of increased price competition but rather because of the increased spatial availability which compensates for the demand inefficiency from a loss of dealer exclusivity

the nash bargaining solution in vertical relations with linear input prices abstract we re examine the nash bargaining solution when an upstream and n downstream firms bargain over a linear input price with unobservable contracts we show that the profit sharing rule is given by a simple and instructive formula which depends on the parties disagreement payoffs the profit weights in the nash product and the elasticity of derived demand a downstream firm s profit share increases in the equilibrium derived demand elasticity which in turn depends on the final goods demand elasticity

the commitment value of contracts under dynamic renegotiation we examine why different renegotiation processes can lead to opposite results regarding the commitment value of third party contracts in the presence of asymmetric information our main result is that a contract loses all strategic value if renegotiation is allowed during the production stage rather than only before production begins this result casts serious doubt on the relevance of previous findings which emphasize how contracts can have commitment value even in the presence of renegotiation our analysis can also be used to understand the differences between many of the results in the renegotiation literature

extracting interaction created surplus abstract this paper demonstrates that the economic surplus which agents produce in bilateral interactions is extractable by an outside party having sufficient initial resources the third party achieves this outcome using a class of exclusive interaction contracts a basic extractability result is shown to be robust to several extensions competition among outside parties multiplicity of interacting agents and a dynamic extension with repeated opportunities to interact finally some connections with the economic intermediation literature are drawn journal of economic literature classification number c79

persistent court corruption levels of court corruption differ widely across the world to give just one example in a recent survey of firms in transition economies the proportion of respondents who answered that firms in their line of business never have to make additional payments to deal with the courts ranged from 86 8 in hungary to just 37 2 in albania a second notable feature of court corruption is its persistence over time in spite of almost universal condemnation of the phenomenon and frequent government anti corruption campaigns this article presents a simple model that explains both the variation and persistence of corruption the main argument is as follows a major role of the legal system is to provide incentives to individuals to take or abstain from certain actions this is true of regulation criminal law contract law and tort law alike however when courts are corrupt the incentive effect provided by court enforced fines and other penalties is reduced to maintain incentives higher penalties are required but these higher penalties in turn raise the bribes that court officials can extract since the stakes to winning a court case are now higher finally higher bribes make court employment more attractive to dishonest individuals which raises the corruptibility of the court loosely speaking then corruption and penalties are complements corruption necessitates higher penalties while higher penalties engender corruption the feedback effect just described gives rise to the possibility of multiple equilibria that is apparently similar countries can have very different levels of court corruption one country may have a relatively honest pool of court officials and a low level of penalties while a second country may have the opposite moreover if a country in a high corruption equilibrium attempts to shift to using smaller penalties the immediate effect is a fall in the incentives provided by the legal system as such a country can find itself stuck in a high corruption equilibrium

inventorship and authorship as attribution rights an enquiry into the economics of scientific credit abstract authorship and inventorship are attribution rights upon which individual scientists build their reputation and career social and legal norms concerning their distribution within research teams are currently criticized for failing to inform third parties on individual contributions we examine the case of teams engaged in the double disclosure of their research results through both publications and patents and model the negotiation process taking place between junior or female team members and the senior male ones we suggest that the former may give up inventorship in order to secure authorship even when entitled to the both based on a sample of 680 patent publication pairs related sets of patents and publications we show that very frequently one or more authors of a publication do not appear as inventors of a related patent this is less likely to happen for first and last authors which is in accordance both with our model and the prevailing legal norms on inventorship however the probability of exclusion from inventorship also declines with seniority and increases for women which is compatible with our model only

customer coalitions monopoly price discrimination and generic entry deterrence abstract this paper analyzes the interplay between a profit maximizing monopolist and a set of consumers who are able to form coalitions that bargain with the monopolist and or integrate into production we show that the monopolist will deter the formation of these countervailing coalitions through strategic selection of generic limit price offers to each consumer these limit prices are derived as subgame perfect equilibria in two alternative models of customer monopoly interplay in both models price discrimination emerges in environments wherein it has previously been considered unprofitable welfare analysis of the equilibria demonstrates the procompetitive effects of potential customer coalitions and generally provides an efficiency based motivation for a government ban on price discrimination

naked exclusion comment the ability of an incumbent firm to deter entry by writing exclusionary contracts with customers has been a subject of contention in the antitrust literature the courts concern with such exclusionary contracts has been challenged by those who argue that an incumbent faced with buyers whose interest is to promote entry and competition would have to pay buyers more for the inclusion of exclusionary provisions than it could possibly gain from exclusion in a provocative article eric b rasmusen et al 1991 henceforth rrw have argued that an incumbent may in fact be able to exclude rivals profitably using such contractual provisions because it can exploit buyers lack of coordination in essence if buyers expect other buyers to sign such provisions then they may see little reason not to do so themselves the rrw argument is potentially an important one because most alleged instances of entry deterrence through exclusionary contracts with customers occur in situations with multiple buyers unfortunately however rrw s two main results contain errors in this note we reconsider the rrw model providing correct characterizations of the likelihood and cost of exclusion for an incumbent firm our results indicate that while the intuition suggested by rrw is valid the equilibrium likelihood and cost of exclusion differ from what rrw derive moreover our analysis illuminates some further aspects of exclusionary contracting with multiple buyers among these issues we focus on how an incumbent can use discriminatory offers to exploit the externalities that exist among buyers in the provision of competition in section i we review the basic assumptions of the rrw model in sections ii and iii we then consider in turn the cases of simultaneous and sequential offers studied by rrw for the simultaneous model we distinguish between settings in which the incumbent can and cannot discriminate in its offers to different buyers this distinction is the source of the problem in rrw s analysis their simultaneous offer model assumes no discrimination but the proof of their proposition 2 assumes at times that discrimination is feasible we show that absent the ability to discriminate the incumbent can exclude profitably only when buyers fail to coordinate on their most preferred continuation equilibrium in contrast we show that when discrimination is possible the incumbent need not rely on a lack of buyer coordination to segal department of economics landau building stanford university stanford ca 94305 e mail ilya segal stanford edu whinston department of economics northwestern university 2003 sheridan road evanston il 60208 e mail mwhinston nwu edu we thank eric rasmusen john wiley and participants in the berkeley stanford iofest the university of copenhagen vertical restraints conference and a seminar at the antitrust division of the u s department of justice for helpful comments we thank federico echenique for excellent research assistance 1 for example a recent department of justice investigation concerned the use of exclusive contracts by the leading provider of computerized ticketing services ticketmaster most major cities have several large concert sports venues in many cities ticketmaster has exclusive contracts with a very large share of these venues 2 the other leading response to the argument that contracts with buyers cannot be a profitable method of exclusion is given in philippe aghion and patrick bolton 1987 section i one factor limiting the applicability of the aghion and bolton theory however is that it involves partial exclusion the contracts signed are not fully exclusionary they involve finite stipulated damages and the profitability of the strategy arises from extracting rents from an entrant when entry occurs indeed in the aghion and bolton model contracts that fully exclude offer no benefits over writing no contract at all in section iii of their paper aghion and bolton also discuss a two buyer version of their model in which externalities arise across buyers in contrast to the analysis here and in rrw they allow the incumbent to make an offer to a buyer i that is conditional on the acceptance decision of the other buyer 3 r innes and r j sexton 1994 also discuss the use of discriminatory offers in the context of a model in which buyers can form coalitions with the entrant

valuing the multidimensional impacts of environmental policy theory and methods a theoretically consistent framework is developed for valuing the multidimensional impacts of environmental policy conventional benefit estimates are shown to be biased because of the presence of substitution and complementarity effects in valuing policy impacts procedures are developed for implementing a valid framework consistent with theory empirical results indicate significant substitution effects in valuing environmental conditions across different geographic regions

hyperinflations their origins development and termination abstract this paper summarizes and critically surveys research on hyperinflation appraisal and review of the literature considers the origins development termination and the lessons to be learned from hyperinflations the historical evidence as well as the econometric evidence is analyzed it is concluded that while the lessons to be learned from such episodes perhaps have been overstated a number of useful implications may be derived from studying hyperinflations such as an understanding of the forces which link monetary and fiscal policies to inflation and policy makers role in influencing individuals expectations

competition with exclusive contracts and market share discounts we analyze firms that compete by means of exclusive contracts and market share discounts conditional on the seller s share of customers total purchases with incomplete information about demand firms have a unilateral incentive to use these contractual arrangements to better extract buyers informational rents however exclusive contracts intensify competition thus reducing prices and profits and in all pareto undominated equilibria increasing welfare market share discounts by contrast produce a double marginalization effect that leads to higher prices and harms buyers we discuss the implications of these results for competition policy jel d43 d83 d86 k21 l14 l42 in this paper we study firms that compete by means of exclusive contracts or mar ket share discounts i e discounts that depend on the seller s share of a customer s total purchases these are common yet seldom studied forms of competition the literature has mainly focused on incumbents use of exclusive contracts or marketshare discounts to deter new entrants whilst paying less attention to competitors deploying similar pricing strategies we show that exclusive contracts intensify competition reducing equilibrium prices whereas market share discounts have a double marginalization effect and hence result in higher prices these findings have a bearing on the current lively policy debate 1 fueled by the fact that antitrust authorities view competition by means of exclusive contracts or marketshare discounts with some suspicion to say the least the authorities main concern appears to be that a dominant firm can use exclusivity or market share discounts to eliminate not only potential competitors but also existing ones a prime instance of this is the case of intel intel whose main competitor amd has been operating for years in the microchip sector offered electronics manufacturers discounts that depended on their buying a minimum share of their total purchases of microchips from intel some customers to qualify for the discount had to opt for an exclusive supply contract that

the right of first offer abstract this paper examines the right of first offer which requires a seller to bargain with the contracted buyer before subsequent buyers arrive the contract also prevents the seller from selling his unique asset to subsequent buyers at a price below what he offers to the contracted buyer the right of first offer makes the seller less aggressive in bargaining with the contracted buyer who is privately informed about his valuation such a contract can reduce inter temporal misallocation in which a subsequent buyer gets the asset when the contracted buyer has higher valuation but it also may cause misallocation in which the contracted buyer gets the asset when subsequent buyers have higher valuations overall whether the right of first offer can increase the joint surplus for the seller and the contracted buyer as well as social welfare depends on the contracted buyer s renegotiation power and the distribution of the buyers valuations this paper also discusses the differences between the right of first offer and the most favored customer clause

institutional determinants of new firm entry in russia a cross regional analysis we investigate how the regional institutional environment in particular the political environment affects russian new firm entry across regions industries firm size classes and time we find that entry rates in russia are explained by natural entry rates and the institutional environment industries that are characterized by low entry barriers in developed market economies are found to have lower entry rates in regions subject to greater political fluidity as in the case of gubernatorial change we also find that higher levels of political fluidity and democracy increase relative entry rates for small sized firms but reduce them for medium sized or large ones

exclusive dealing before bork and beyond abstractantitrust scholars have come to accept the basic ideas about exclusive dealing that bork articulated in the antitrust paradox indeed they have even extended his list of reasons why exclusive dealing can promote economic efficiency yet they have also taken up his challenge to explain when exclusive dealing might possibly cause harm and have modeled a variety of special cases where it does some albeit not all of these are sufficiently plausible to be useful to prosecutors and judges

exclusive contracts and bargaining power abstract incorporating nash bargaining into the standard one buyer one supplier framework in the chicago school critique we show a possibility that an inefficient incumbent supplier can deter a socially efficient new supplier entry through exclusive contracts

modern hyper and high inflations since 1947 hyperinflations by cagan s definition in market economies have been rare much more common have been longer inflationary processes with inflation rates above 100 percent per annum based on a sample of 133 countries and using the 100 percent threshold as the basis for a definition of very high inflation episodes this paper examines the main characteristics of such inflations among other things we find that i close to 20 percent of countries have experienced inflation above 100 percent per annum ii higher inflation tends to be more unstable iii in high inflation countries the relationship between the fiscal balance and seigniorage is strong both in the short and long run iv inflation inertia decreases as average inflation rises v high inflation is associated with poor macroeconomic performance and vi stabilizations from high inflation that rely on the exchange rate as the nominal anchor are expansionary

a difficulty with the travel cost method instead of observable prices of recreational visits travel cost method tcm re searchers are obliged to substitute researcher assigned visitation cost estimates i argue that visitation costs are inherently subjective but are ordinally measurable so long as the cost in creases with distance travelled it follows that traditional tcm yields only ordinally measur able welfare estimates the household produc tion function formulation of tcm resolves this problem only by imposing severe and un testable analytical restrictions tcm cannot serve as a stand alone technique for estimating recreation benefits rather it must be calibrated using information generated with fundamentally different methods jel q26

on the economic efficiency of liquidated damages abstract recently aghion and bolton american economic review 1987 77 388 401 have shown that liquidated damages can serve as a barrier to entry and may therefore be socially harmful in this paper i show that liquidated damages remain excessive and continue to serve as a barrier to entry even in the presence of relationship specific investment but may nevertheless have an overall positive effect on welfare

upgrades switching costs and the leverage theory of tying this article investigates the role of product upgrades and consumer switching costs in the tying of complementary products previous analyses have found that a monopolist of one product will not increase its profits and reduce social welfare by tying and leveraging its monopoly position into a complementary market if the initial monopolised product is essential where essential means that all uses of the complementary good require the initial monopolised product we show that this is not true in settings characterised by product upgrades and consumer switching costs we also discuss various extensions including the role of the reversibility of tying

the rise of economics in competition policy a canadian perspective competition policy in canada and elsewhere has changed remarkably over the last 50 yearsin large measure due to advances in economics in this article we trace the impact of developments in industrial organization on the three central areas of competition policy cartels single firm conduct and mergers we focus on canadian competition policy but draw comparisons with developments in the united states and europe

upfront payments and exclusion in downstream markets although upfront payments are often observed in contracts between manufacturers and retailers little is known about their competitive effects or the role retailers play in securing them in this article we consider a model in which two competing retailers make take it or leave it offers to a common manufacturer we find that upfront payments are a feature of equilibrium contracts and in all equilibria only one retailer buys from the manufacturer these findings support the claims of small manufacturers who argue that they are often unable to obtain widespread distribution for their products because of upfront payments copyright 2007 rand

exclusive contracts foster relationship specific investment exclusive contracts prohibit one or both parties from trading with anyone else contrary to earlier findings we show that investments that are specific to the contracting parties may be encouraged by exclusivity results depend on the nature of investments and the bargaining solution the major part of the analysis shows that exclusivity deals designed to assure the supply of essential inputs promote investment infinite penalties for breach even if ex post renegotiable may result in excessive investment in which case a positive but finite damage payment yields the first best outcome

nonlinear pricing and exclusion i buyer opportunism we study the exclusionary properties of nonlinear price quantity schedules in an aghion bolton style model with elastic demand and product differentiation we distinguish three regimes depending on whether and how the price charged by the dominant firm depends on the quantity purchased from the rival firm we find that the supply of rival good is distorted downward moreover given the quantity supplied from the rival the buyer may opportunistically purchase inefficiently many units from the dominant firm to pocket quantity rebates we show that the possibility for the buyer to dispose of unconsumed units attenuates the opportunism problem and limits the exclusionary effects of nonlinear pricing

the role of exclusive contracts in facilitating market transactions vertical contracts between a buyer and a seller often contain exclusivity provisions that restrict their ability to transact with third parties in the future in this paper we develop a matching model in which matched agents first decide whether or not to adopt exclusivity provisions and then bargain over the price of a good in the presence of private information we show that by making disagreement more costly exclusivity provisions reduce the risk of inefficient bargaining breakdowns and that agents find it optimal to adopt exclusive contracts in thin markets but not in thick markets for intermediate levels of market thickness all agents matched and unmatched would be better off if courts did not enforce the exclusivity provisions

strategic effects of three part tariffs under oligopoly the distinct element of a three part tariff 3pt compared with linear pricing lp or a two part tariff is its quantity target within which the marginal price is zero this quantity target instrument enriches the firm s strategy set in dictating the competition to a specific level even in the absence of a usual price discrimination motive with general differentiated linear demands the competitive effect of a 3pt in contrast to lp depends on the degree of substitutability between products competition is intensified when two products are more differentiated yet softened when two products are more substitutable

the timing of mergers along the production chain capital structure and risk dynamics abstract i demonstrate that the timing of vertical mergers is generally dependent on industry characteristics my predictions are consistent with empirically observed patterns of vertical mergers i show that merger activity during economic upturns tends to be motivated by operating efficiencies while merger activity during economic downturns tends to occur as a means of keeping production chain operational mergers allow firms to capture synergies and improve efficiencies in order to survive economic contractions the pricing framework implies that a vertical merger decision usually reduces risk during two different economic states

endogenous games and mechanisms side payments among players we characterize the outcomes of games when players may make binding offers of strategy contingent side payments before the game is played this does not always lead to efficient outcomes despite complete information and costless contracting the characterizations are illustrated in a series of examples including voluntary contribution public good games cournot and bertrand oligopoly principal agent problems and commons games among others

buyer power and intrabrand coordination we analyze the competitive effects of vertical contracts in a contracting situation where rival retailers offer contracts to a manufacturer in contrast to bernheim and whinston 1998 who study the situation in which competing manufacturers offer contracts to a common retailer we find that two part tariffs even if contingent on exclusivity or not do not suffice to implement the monopolyoutcome richer arrangements including e g conditional fixed fees and upfront payments are thus required to internalize all contracting externalities the welfare implications are ambiguous on the one hand richer contracts ensure that no efficient retailer is excluded on the other hand they allow firms to maintain monopoly prices despite intrabrand competition simulations suggest that the latter effect may be more significant

strategic ex ante contracts rent extraction and opportunity costs this article cosiders the possibility that a seller can contract with one uninformed buyer prior to an auction involving two potential buyers the seller s optimal strategic ex ante contract more accurately reflects joint opportunity costs of the seller and the contracted buyer and therefore extracts more rent from the entrant moreover this ex ante contract mitigates the seller s ex post rent seeking vis a vis the contracted buyer accordingly it may create more social welfare than the absence of ex ante contracts depending upon the contracted buyer s financial constraint and the distributions of trade surplus implementation of the optimal strategic ex ante contract and policy implications are discussed

an analysis of joint costs in a managed forest ecosystem abstract this paper analyzes the tenability of line item budgeting and independently determined output costs for a managed forest ecosystem the general problem of cost allocation in a joint production system is discussed as one of choosing paths of integration a production structure is hypothesized for describing a managed forest ecosystem and its characteristics of jointness are discussed finally an empirical case example is presented which indicates that cost estimates and associated means of production which result from single output costing procedures and from joint costing procedures may be significantly different in a managed forest ecosystem

eliminating the market for secondhand goods an alternative explanation for leasing there are a number of prominent specific instances in which a durable goods manufacturer with significant market power employed a lease only policy i united shoe in the market for shoe machinery ii ibm in the market for computers and iii xerox in the market for copiers the obvious question that arises is why would such a firm prefer leasing over selling in this article i argue that one role of the lease only policy was to eliminate the market for secondhand goods the article formally demonstrates the argument discusses the relationship between this article and earlier literature on secondhand markets and discusses the implications for antitrust policy

exclusive contracts and market dominance we propose a new theory of exclusive dealing the theory is based on the assumption that a dominant firm has a competitive advantage over its rivals and that the buyers willingness to pay for the product is private information in this setting the dominant firm can impose contractual restrictions on buyers without necessarily compensating them implying that exclusive dealing contracts can be both profitable and anticompetitive we discuss the general implications of the theory for competition policy and illustrate by examples its applicability to antitrust cases jel d21 d43 d82 d86 k21 l13 l40