Diagnosing Foreclosure Due to Exclusive Dealing

39 Pages Posted: 31 Oct 2008

Multiple version iconThere are 2 versions of this paper

Date Written: October 2005

Abstract

Exclusive dealing arrangements, in which a distributor contracts to work exclusively with a single manufacturer, can be efficiency enhancing or they can be an anticompetitive means to foreclose markets. This paper evaluates the effect of exclusive distribution arrangements on competition inthe Chicago beer market in 1994. A diagnostic test is provided to judge whether exclusive arrangements between brewers and their distributors lead to foreclosure. To implement this test I estimate a model of consumer demand and firm behavior that incorporates industry details and allows fordistribution through exclusive and shared channels. The test indicates thatforeclosure effects are not present in this market, suggesting that the most likely effect of intervention would be to reduce social welfare.

Keywords: Exclusive dealing, foreclosure, vertical restraints

Suggested Citation

Asker, John William, Diagnosing Foreclosure Due to Exclusive Dealing (October 2005). NYU Working Paper No. EC-04-36, Available at SSRN: https://ssrn.com/abstract=1292619

John William Asker (Contact Author)

UCLA ( email )

8283 Bunche Hall
Los Angeles, CA 90095-1477
United States

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