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Exclusive dealing: the interaction between foreclosure and investment promotion

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  • Fumagalli, Chiara
  • Motta, Massimo
  • Rønde, Thomas

Abstract

This paper studies a model where exclusive dealing (ED) can both promote investment and foreclose a more efficient supplier. While investment promotion is usually regarded as a pro-competitive effect of ED, our paper shows that it may be the very reason why a contract that forecloses a more efficient supplier is signed. Absent the effect on investment, the contract would not be signed and foreclosure would not be a concern. For this reason, considering potential foreclosure and investment promotion in isolation and then summing them up may not be a suitable approach to assess the net effect of ED. The paper therefore invites a more cautious attitude towards accepting possible investment promotion arguments as a defence for ED.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7240.

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Date of creation: Mar 2009
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Handle: RePEc:cpr:ceprdp:7240

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Keywords: Monopolization practices; Vertical agreements;

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References

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Cited by:
  1. Boone, J. & Müller, W. & Suetens, S., 2009. "Naked Exclusion: Towards a Behavioral Approach to Exclusive Dealing," Discussion Paper 2009-017, Tilburg University, Tilburg Law and Economic Center.
  2. Muriel Fadairo & Jianyu Yu, 2014. "Economic Rationales of Exclusive Dealing ; Empirical Evidence from the French Distribution Networks," Working Papers 1405, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.

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