Competition in nonexclusive contracts may lead to higher prices for customers.
The article explores how competition and incentives work when firms can't enforce exclusive contracts. In a market where customers can choose from multiple firms for credit or insurance, outcomes are influenced by customer effort that firms can't control. The study shows that in certain equilibria, there can be more rationing compared to exclusive contracts. Increasing public provision or competition can lead to higher prices in the private market due to reduced customer effort.