Monopolization with Must-Haves

Ide, Enrique and Juan-Pablo Montero
Monopolization with Must-Haves

American Economic Journal: Microeconomics, Vol. 16, No. 3, August 2024, pp. 284-320

ABSTRACT: An increasing number of monopolization cases have been constructed around the notion of “must-have” items: products that distributors must carry to “compete effectively.” Motivated by these cases, we consider a multiproduct setting where upstream suppliers sell their products through competing distributors offering one stop-shopping convenience to consumers. We show the emergence of products that distributors cannot afford not to carry if their rivals do. A supplier of such products can exploit this must-have property, along with tying and exclusivity provisions, to monopolize adjacent, otherwise competitive markets. Policy interventions that ban tying or exclusivity provisions may prove ineffective or even backfire.