Naked Exclusion in the Lab: The Case of Sequential Contracting

Abstract

In the context of the naked exclusion model of Rasmusen, Ramseyer and Wiley [1991] and Segal and Whinston [2009b], we examine whether sequential contracting is more conducive to exclusion in the lab, and whether it is cheaper for the incumbent than simultaneous contracting. We find that an incumbent who proposes contracts to buyers sequentially, excludes significantly more often 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 contract the higher the payment, substantially improves the fit between theoretical predictions and observed behavior.

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