Naked exclusion in the lab: The case of sequential contracting

Wednesday 29 February 2012, 4.15PM to 17:45

Speaker(s): Professor Wieland Muller, University of Vienna

Abstract

In the context of the naked exclusion model of Rasmusen, Ramseyer and Wiley (AER, 1991) and Segal and Whinston (AER, 2000b), we examine whether sequential contracting is more conducive to exclusion in the lab, and whether it leads to lower exclusion costs for the incumbent, than simultaneous contracting. We find that an incumbent who proposes exclusive contracts to buyers sequentially, is better able to deter entry than an incumbent who proposes contracts simultaneously. In contrast to theory, this comes at a substantial cost for the incumbent. Accounting for the observation that buyers are more likely to accept an exclusive deal the higher is the payment, substantially improves the fit between theoretical predictions and observed behavior.

Location: ARRC Auditorium