Exclusive Dealing: Investment Promotion May Facilitate Inefficient Foreclosure

Chiara Fumagalli, Massimo Motta, Thomas Rønde

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    Abstrakt

    This paper studies a model whereby exclusive dealing (ED) can both promote investment and foreclose a more efficient supplier. Since ED promotes the incumbent seller's investment, the seller and the buyer realize a greater surplus from bilateral trade under exclusivity. Hence, the parties involved may sign an ED contract that excludes a more efficient entrant in circumstances where ED would not arise absent investment. The paper therefore invites a more cautious attitude towards accepting possible investment promotion arguments as a defense for ED.
    OriginalsprogEngelsk
    TidsskriftJournal of Industrial Economics
    Vol/bind60
    Udgave nummer4
    Sider (fra-til)599-608
    ISSN0022-1821
    DOI
    StatusUdgivet - dec. 2012

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