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...

We extend the literature on exclusive dealing by allowing the incumbent and the potential entrant to merge. This uncovers new effects. First, exclusive deals can be used to improve the incumbent’s bargaining position in the merger negotiation. Second, the incumbent finds it easier to elicit...

We propose a simple theory of predatory pricing, based on scale economies and sequential buyers (or markets). The entrant (or prey) needs to reach a critical scale to be successful. The incumbent (or predator) is ready to make losses on earlier buyers so as to deprive the prey of the scale it...

Recent cases in the US (Meritor, Eisai) and in the EU (Intel) have revived the debate on the use of price-cost tests in loyalty discount cases. We draw on existing recent economic theories of exclusion and develop new formal material to argue that economics alone does not justify applying a...

Miscoordination of buyers might prevent entry in an industry with an incumbent and a more efficient potential entrant. Buyers' power therefore favours entry by eliminating coordination problems. We also identify a mechanism which facilitates entry: if the potential entrant could credibly offer...

Rasmusen et al. (1991) and Segal and Whinston (2000) show that an incumbent monopolist might exclude entry of a more efficient competitor, by exploiting externalities among buyers. We show that their results hold only when downstream competition among buyers does not exist or is weak enough....

We show that when the researcher’s (observable but not contractible) contribution to innovation is crucial, a covenant not to compete (CNC) reduces effort and profits under both spot and relational contracts. Having no CNC allows the researcher to leave for a rival. This alleviates a...

We analyze a model where a multinational firm can use a superior technology in a foreign subsidiary only after training a local worker. Technological spillovers from foreign direct investment arise when this worker is later hired by a local firm. Pecuniary spillovers arise when the foreign...

This paper analyses the sources of buyer power and its effect on sellers’ investment in quality improvements. In our model retailers make take-it-or-leave-it offers to a producer and each of them obtains its marginal contribution to total profits (gross of sunk costs). In turn, this depends on...

This Paper analyses the interaction between internal capital market allocations and product market competition. It is argued that diversification and divestiture are both rational responses to anticipated changes in the competitive environment. Diversification is the optimal response to an...