Exclusive Dealing: The Interaction between Foreclosure and Investment Promotion

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.


Issue Date:
2009
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/56213
Total Pages:
39
JEL Codes:
L12; L40; L42
Series Statement:
IM
120.2009




 Record created 2017-04-01, last modified 2017-04-04

Fulltext:
Download fulltext
PDF

Rate this document:

Rate this document:
1
2
3
 
(Not yet reviewed)