EXCLUSIVITY IN NETWORK INDUSTRIES

Carl Shapiro

1/01/2005
(Original Publish Date: 1999)

Section I of this article sets forth the economic logic leading to the conclusion that exclusive dealing in network industries can inhibit the emergence of superior technologies, and illustrates this logic with several examples.5 Section II explains how exclusivity can cause greater harm to industry performance in network industries than in other settings. Section III describes the elements of a more formal economic model of exclusivity in network industries. Section IV contrasts an incumbent network's exclusive membership rules and exclusive dealing provisions with a simple refusal by the established network to interconnect with a new network.