Exclusive dealing, entry, and mergers

Chiara Fumagalli (), Massimo Motta () and Thomas Roende
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Chiara Fumagalli: Università Luigi Bocconi, CSEF and CEPR
Thomas Roende: Copenhagen Business School and CEPR

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

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.

Date: 2009-05-01
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Published in Journal of Industrial Economics,Volume 57, Issue 4, December 2009, pp. 785–811

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http://www.csef.it/WP/wp225.pdf (application/pdf)

Related works:
Working Paper: Exclusive dealing, entry, and mergers (2006)
Working Paper: Exclusive Dealing, Entry and Mergers (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:sef:csefwp:225

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