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Exclusive dealing: the interaction between foreclosure and investment promotion

Chiara Fumagalli (), Massimo Motta () and Thomas Rønde

No 7240, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: 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.

Keywords: Monopolization practices; Vertical agreements (search for similar items in EconPapers)
JEL-codes: L12 L40 L42 (search for similar items in EconPapers)
Date: 2009-03
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Working Paper: Exclusive Dealing: The Interaction between Foreclosure and Investment Promotion (2009) Downloads
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