Exclusive dealing, entry, and mergers
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.
|Date of creation:||01 May 2009|
|Date of revision:|
|Publication status:||Published in Journal of Industrial Economics,Volume 57, Issue 4, December 2009, pp. 785–811|
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NBER Working Papers
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