Working Paper No. 718

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

Published: September 20, 2007Pages: 25Keywords: Technology Transfer; Inefficient Entry; Antitrust; Authority's BehaviorJEL-codes: L24; L42

On the Anticompetitive Effect of Exclusive Dealing when Entry by Merger is Possible Chiara Fumagalli, Massimo Motta, Lars Persson


We extend the literature on exclusive dealing, which assumes that entry can occur only by installing new capacity, by allowing the incumbent and the potential entrant to merge. This uncovers new effects. First, exclusive deals 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. Third, exclusive dealing, despite allowing the more efficient technology to find its way into the industry, reduces welfare because (i) it may trigger entry through merger whereas independent entry would be socially optimal, (ii) it leads to a sub-optimal contractual price when the exclusive dealing include a price commitment, (iii) it may deter entry altogether.


Lars Persson

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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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