Exclusive Dealing: Investment Promotion May Facilitate Inefficient Foreclosure

Research output: Contribution to journalJournal article

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.

Publication information

Original languageEnglish
JournalJournal of Industrial Economics
Issue number4
Pages (from-to)599-608
StatePublished - Dec 2012

ID: 38111627