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Monopolization with Must-Haves

By: Contributor(s): Material type: TextTextPublication details: American Economic Journal: Microeconomics; 2024Description: 284-320ISSN:
  • 1945-7669
Subject(s): Online resources: Summary: 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.
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Article Index Article Index Dr VKRV Rao Library Vol. 16, No. 3 Not for loan AI454

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.

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