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  3. American Economic Review
  4. December 2009
  5. Naked Exclusion: An Experimental Study of Contracts with Externalities

Naked Exclusion: An Experimental Study of Contracts with Externalities

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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)

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

Additional Materials

JEL Classification

  • 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