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For many years, both horizontal and vertical agreements were, considered anticompetitive and subject to per se condemnation under the antitrust laws. Recently, however, this approach has come under attack, and what was once the conventional wisdom is no longer so. This article investigates the competitive implications of a particular vertical agreement, the imposition of exclusive dealing requirements by a manufacturer on his distributors. Economist Howard Marvel provides an efficiency rationale for exclusive dealing and ignores the prospect that anticompetitive effects may follow. This article examines the possible anticompetitive effects neglected by Marvel. It constructs a simple model of exclusive dealing arrangements. The first assumption of this model is that there exists a single dominant manufacturer producing a single product at constant unit costs in the relevant range of output. There are two classes of consumers for the firm's product. Members of the first group believe it superior to any rival brand. The remaining consumers, members of the second group view the product of all sellers as identical.

The behavior of firms in oligopolistic markets has long posed a major conundrum to economists. That firms respond to the presence of mutual interdependence is undeniable, which indicates only that they behave strategically. This article examines some forms of strategic behavior which have received recent attention. In addition, the authors consider the implications for antitrust analysis of this conduct. Firm behavior in oligopolistic markets is typically strategic. Indeed, what one generally expects from the recognition of mutual interdependence in oligopoly is that the expected reactions of rivals is accounted for in all market decisions. Only if one posits Nash behavior generally is this interdependence ignored and firms behave nonstrategically. That strategic considerations are typically unavoidable is seen from the general first-order conditions for profit maximization for a duopolist. Actions which represent either predatory conduct or entry deterrence are strategic in nature, although not all strategic behavior takes these forms. The former is designed to lead existing rivals to certain choices, while the latter emphasizes the impact on prospective entrants.

The article highlights some aspects of a continuing study on the economic effects of advertising. It also presents some evidence bearing upon the implications of product differentiation via advertising. Product differentiation can play a dual role. Not only may it affect the height of entry barriers but also it may influence competitive relationships among established firms. Advertising and the associated product differentiation may influence the relationship between large firms and small by affecting both relative costs and relative prices. These are in fact closely tied effects. The interindustry analysis of profit rate differences and minimum efficient firm size provide some empirical support for the hypothesis that there are advantages to size which are related to the level of advertising intensity in an industry. These results suggest that there are net advantages to large firms--beyond those attributable to economies of large-scale plants in industries where product differentiation via advertising is an important dimension of industry structure.

In recent years, there has been a rapid advance in the development of antimerger policy. Although the enforcement agencies frequently encounter adverse rulings in the lower courts, they have gathered a string of victories on appeals taken to the Supreme Court. Despite the flow of recent cases, there is still considerable dispute concerning some of the issues which underlie this expanded enforcement effort. Of these, one of the most important refers to the circumstances in which vertical acquisitions have the effect of promoting and extending market power. In this article, the author examines this problem in light of the current status of enforcement towards vertical mergers. Vertical acquisitions may be considered on the same basis as other mergers between firms which are not direct competitors. The most important advantage of a prohibition of certain kinds of vertical mergers lies, it seems, in the temptation it creates for the monopolists or monopsonists on each separate stage to integrate forward or backward by establishing new facilities. Whereas vertical integration by merger may block the increase of competition in the industry, competition may be effectively increased when firms extend their facilities to enter production at the stages of their erstwhile suppliers or customers.