The competitive effects of exclusive dealing: Evidence from the U.S. beer industry

Several recent theoretical articles have modeled the effects of exclusive-dealing contracts that restrict dealers to selling a single brand, yet detailed empirical analysis of the impact of exclusivity on actual market outcomes has been lacking. I analyze a unique set of firm-level data on nearly 400 beer distributors in the United States. The impacts of economies of scale and restrictions on distributor promotional activities on the use of exclusive dealing are measured as well as the effects of exclusivity on costs, prices and output. The results support the view that exclusive dealing serves to minimize manufacturer-dealer incentive conflicts and enhances social welfare.