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Academic Articles Awards > Economics

Diagnosing Foreclosure due to Exclusive Dealing

John Asker, Journal of Industrial Economics (64), September 2016

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Exclusive dealing arrangements, in which a distributor contracts to work exclusively with a single manufacturer, can be e-ciency enhancing or they can be an anticompetitive means to foreclose markets. This paper evaluates the e-ect of exclusive distribution arrangements on competition in the 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 -rm behavior that incorporates industry details and allows for distribution through exclusive and shared channels. The test indicates that foreclosure e-ects are not present in this market, suggesting that the most likely e-ect of intervention would be to reduce social welfare.

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