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  5. Monopolization with Must-Haves

Monopolization with Must-Haves

  • Enrique Ide
  • Juan-Pablo Montero
American Economic Journal: Microeconomics (Forthcoming)

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 onestop- 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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