EXCLUSIVE DEALING

In this paper, we provide a conceptual framework for understanding the phenomenon of exclusive dealing, and we explore the motivations for a nd effects of its use. For a broad class of models, we characterize th e outcome of a contracting game in which manufacturers may employ excl usive dealing provisions in their contracts. We then apply this charac terization to a sequence of specialized settings. We demonstrate that exclusionary contractual provisions may be irrelevant, anticompetitive , or efficiency-enhancing, depending on the setting. More specifically , we exhibit the potential for anticompetitive effects in noncoinciden t markets (i.e., markets other than the ones in which exclusive dealin g is practiced), and we explore the potential for the enhancement of e fficiency in a setting in which common representation gives rise to in centive conflicts. In each instance, we describe the manner in which e quilibrium outcomes would be altered by a ban on exclusive dealing. We demonstrate that a ban may have surprisingly subtle and unintended ef fects.