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American Economic Review: Vol. 99 No. 5 (December 2009)

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Naked Exclusion: An Experimental Study of Contracts with Externalities

Article Citation

Landeo, Claudia M., and Kathryn E. Spier. 2009. "Naked Exclusion: An Experimental Study of Contracts with Externalities." American Economic Review, 99(5): 1850-77.

DOI: 10.1257/aer.99.5.1850

Abstract

This paper reports the results of an experiment on exclusive contracts. We replicate the strategic environment described by Rasmusen, Ramseyer, and Wiley (1991) and Segal and Whinston (2000). Our findings are as follows. First, when the buyers can communicate, discrimination raises the likelihood of exclusion. Second, when the incumbent seller is unable to discriminate and must make the same offers to the buyers, communication reduces the likelihood of exclusion. Communication also induces more generous offers when the seller cannot discriminate, and divide-and-conquer offers when the seller can discriminate. Third, when communication is allowed, payoff endogeneity increases the likelihood of exclusion. (JEL C72, C91, D62, D86, K12, K21, L12, L42)

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Authors

Landeo, Claudia M. (U Alberta and Northwestern U)
Spier, Kathryn E. (Harvard U)

JEL Classifications

C72: Noncooperative Games
C91: Design of Experiments: Laboratory, Individual
D62: Externalities
D86: Economics of Contract: Theory
K12: Contract Law
K21: Antitrust Law
L12: Monopoly; Monopolization Strategies


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