Competition and incentives with nonexclusive contracts

Charles M. Kahn, Dilip Mookherjee

Research output: Contribution to journalArticlepeer-review


We consider a common agency context where socially desired exclusive dealing clauses cannot be enforced. Customers sequentially negotiate nonexclusive credit or insurance contracts from multiple risk-neutral firms in a market with free entry. Each contract is subject to moral hazard arising from a common noncontractible effort decision. Outcomes of a class of Markov equilibria are characterized by a corresponding notion of constrained efficiency. These may involve more rationing than in a context of exclusive contracts. Increases in public provision or competition can result in increased prices on the private market, owing to an induced reduction in customer effort.

Original languageEnglish (US)
Pages (from-to)443-465
Number of pages23
JournalRAND Journal of Economics
Issue number3
StatePublished - 1998

ASJC Scopus subject areas

  • Economics and Econometrics


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