Market-share contracts as a more effective exclusionary device

Zhijun Chen, Greg Shaffer

Research output: Working paperWorking PaperResearch

Abstract

Exclusionary contracts have long been a focus of antitrust law and the subject of much scholarly debate. This paper compares two types of exclusionary contracts, exclusive-dealing and market-share contracts, in a model of naked exclusion. We discuss the different mechanisms through which each works and identify a fundamental tradeoff that arises: market-share contracts do better at maximizing a seller's benefit from foreclosure whereas exclusive-dealing contracts do better at minimizing a seller's cost of foreclosure. We give settings in which each can be more profitable and show that welfare can be worse under market-share contracts.
Original languageEnglish
Number of pages47
Publication statusPublished - 2016

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