Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

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Thursday, February 14, 2013

Exclusive Dealing: Investment Promotion May Facilitate Inefficient Foreclosure

Posted by D. Daniel Sokol

Chiara Fumagalli, Bocconi University - Department of Economics; Centre for Economic Policy Research (CEPR), Massimo Motta, Universitat Pompeu Fabra and Thomas Ronde, University of Copenhagen - Department of Economics; Center for Economic and Business Research (CEBR); Centre for Economic Policy Research (CEPR) have an interesting paper on Exclusive Dealing: Investment Promotion May Facilitate Inefficient Foreclosure.

ABSTRACT: 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.

http://lawprofessors.typepad.com/antitrustprof_blog/2013/02/exclusive-dealing-investment-promotion-may-facilitate-inefficient-foreclosure.html

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