VERY PRELIMINARY AND INCOMPLETE

This paper studies a model where exclusive dealing (ED) can both promote investment and foreclose a more efficient supplier. While invest-ment promotion is usually regarded as a pro-competitive effect of ED, our paper shows that it may be the reason why a contract that forecloses a more efficient supplier is signed. Absent the effect on investment, the contract would not be signed and foreclosure would not be a concern. For this reason, considering potential foreclosure and investment promotion in isolation and then summing them up may not be a suitable approach to assess the net effect of ED. The paper shows that taking into account their interaction may lead to very different conclusions. 1