American Economic Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
Noncompete Agreements and the Welfare of Consumers
American Economic Journal: Microeconomics
vol. 16,
no. 4, November 2024
(pp. 112–53)
Abstract
Employee spin-offs harm incumbent firms by increasing competition (benefiting consumers) and preventing firm owners from making beneficial investments in workers who may later spin off (harming consumers). We model noncompete agreements (NCAs) as solutions for the firm and analyze the resulting trade-off for consumers. We show that market structure and the nature of investment play large roles. Counterintuitively, increased investment benefits have the potential to harm consumers such that industries where firms value NCAs the most are those where harm is greater. Finally, we draw two analogies between NCAs and antitrust and show how those areas inform NCA policy.Citation
Lipsitz, Michael, and Mark J. Tremblay. 2024. "Noncompete Agreements and the Welfare of Consumers." American Economic Journal: Microeconomics, 16 (4): 112–53. DOI: 10.1257/mic.20210426Additional Materials
JEL Classification
- D42 Market Structure, Pricing, and Design: Monopoly
- D43 Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection
- J41 Labor Contracts
- K21 Antitrust Law
- L26 Entrepreneurship
- M13 New Firms; Startups
- M53 Personnel Economics: Training
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