The role of exclusive contracts in facilitating market transactions

Niko Matouschek*, Paolo Ramezzana

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

13 Scopus citations

Abstract

We examine the relationship between market conditions and the adoption of exclusive contracts. In particular, we develop a matching model in which agents may decide to adopt exclusive contracts to reduce bilateral bargaining inefficiencies in the presence of private information. We show that it is optimal for agents to adopt exclusive contracts in thin markets but not in thick markets and that for intermediate levels of market thickness strategic complementarities lead to multiple equilibria. We study the welfare properties of market equilibria and discuss under what circumstances courts should enforce exclusive contracts.

Original languageEnglish (US)
Pages (from-to)347-371
Number of pages25
JournalJournal of Industrial Economics
Volume55
Issue number2
DOIs
StatePublished - Jun 2007

ASJC Scopus subject areas

  • Accounting
  • Business, Management and Accounting(all)
  • Economics and Econometrics

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