Incapacitating the Competition: The Impact of Vertical Restraints on Technology Adoption

Laura Grigolon and Michelle Sovinsky

No 21046, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Vertical restraints imposed on some downstream buyers can affect non-contracted firms by weakening upstream suppliers’ effective viability. We study these contracting externalities using Intel’s exclusionary agreements with PC manufacturers in the microprocessor market. Combining litigation-based measures of restraints with PC data, we estimate dynamic models of AMD adoption that allow for cross-buyer spillovers. We find that exclusivity imposed on a given buyer significantly reduces adoption by other, non-contracted buyers, generating sizable and persistent market-wide effects. The paper provides the first empirical quantification of the economic magnitude of contracting externalities and highlights the broader competitive risks posed by exclusionary contracting.

JEL-codes: D22 K21 L42 L63 (search for similar items in EconPapers)
Date: 2026-01
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