Adverse Selection and Partial Exclusive Dealing

Abstract

I reconcile a disagreement in the literature regarding the impact of downstream price competition on anticompetitive exclusive dealing, and then extend the exclusive dealing literature to accommodate adverse selection. Adverse selection expands the scope of inecient exclusion, and may also explain policies of partial exclusion, in which an incumbent prots by locking up select retailers even though the entrant's product is still competitively supplied in equilibrium. I relate my results to recent antitrust cases against Intel. Consider a market entrant facing two key challenges: gaining access to consumers and con- vincing them that it sells a good product. These challenges are particularly dire because the incumbent may curtail the entrant's access to consumers by oering retailers exclusive contracts, and because the market is aicted