Monday, November 16, 2009

Exclusive Dealing in the Cell Phone Industry

Exclusive deals are a part of business, and can be pro-competitive. For small firms, having an exclusive deal with a supplier or a vendor can reduce the uncertainty of doing business and give each party a greater incentive to invest more in pre-sales and post-sales services. This can lead to more innovation, better products or services and a greater degree of healthy competition.

Exclusive deals can also be anti-competitive. For firms (typically) with a great degree of market power, exclusive deals can lock out new competitors, reduce the choice to customers, and reduce competition.

In testimony to lawmakers earlier this year, some wireless carriers suggested that the degree of exclusive deals in wireless communications is the later, not the former. From the article, there seems to at least be the possibility that the amount of exclusive deals among wireless carriers and smartphone manufacturers is reducing consumer welfare.

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