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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Ph: +46 8 665 4504
lars.persson@ifn.se

Interdisciplinary European Studies

The European Union and the Return of the Nation State

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This book explores the complex and ever-changing relationship between the European Union and its member states. The recent surge in tension in this relationship has been prompted by the actions of some member state governments as they question fundamental EU values and principles and refuse to implement common decisions seemingly on the basis of narrowly defined national interests.

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