The Effects of Platform Most-Favored-Nation Clauses on Competition and Entry

Authors

Andre BoikFollow
Kenneth S. CortsFollow

Start Page

105

Abstract

In the context of sellers who sell their products through intermediary platforms, a platform most-favored-nation (PMFN) clause is a contractual restriction requiring that a particular seller will not sell at a lower price through a platform other than the one with which it has the PMFN agreement. Contractual restrictions observed in markets for e-books and travel services, among other settings, can be viewed as examples of this phenomenon. We show that PMFN clauses typically raise platform fees and retail prices and curtail entry or skew positioning decisions by potential entrants pursuing low-end business models.

Recommended Citation

Boik, Andre and Corts, Kenneth S. (2016) "The Effects of Platform Most-Favored-Nation Clauses on Competition and Entry," Journal of Law and Economics: Vol. 59: No. 1, Article 4.
Available at: https://chicagounbound.uchicago.edu/jle/vol59/iss1/4