2006–2010

On the Anticompetitive Effect of Exclusive Dealing when Entry by Merger is Possible

Reprint No. 2009:42

Author(s): Chiara Fumagalli, Massimo Motta and Lars PerssonYear: 2009 Title: Journal of Industrial Economics Volume (No.): 57 (4) Pages: 785–811
Online article (restrictions may apply)


We extend the literature on exclusive dealing by allowing the incumbent and the potential entrant to merge. This uncovers new effects. First, exclusive dealing can be used to improve the incumbent’s bargaining position in the merger negotiation. Second, the incumbent finds it easier to elicit the buyer’s acceptance of exclusivity. Third, despite allowing the more efficient technology to find its way into the industry, exclusive dealing reduces welfare because (i) it may trigger entry through merger whereas independent entry would be socially optimal and (ii) it may deter entry altogether.


Reference:
Fumagalli, Chiara, Massimo Motta and Lars Persson (2009), "On the Anticompetitive Effect of Exclusive Dealing when Entry by Merger is Possible". Journal of Industrial Economics 57(4), 785–811.

Lars Persson

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Interdisciplinary European Studies

The European Union in a Changing World Order

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This book explores how the European Union responds to the ongoing challenges to the liberal international order. These challenges arise both within the EU itself and beyond its borders, and put into question the values of free trade and liberal democracy. 

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