Consumer Promotion, Exclusive Dealings and ‘hold-up Defense’
Abstract: Under incomplete contracts, exclusivity clauses might prevent hold-up behavior and thus sustain specific investments like consumer promotion. However, exclusive dealing might generate a trade-off between the enforcement of incomplete contracts and market foreclosure, in particular when the investor is a dominant firm. A simple model and the analysis of two main US antitrust cases, clarify the nature of such trade-off in presence of investments in consumer promotion.
