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

27 Pages Posted: 1 Dec 2009

See all articles by Chiara Fumagalli

Chiara Fumagalli

Bocconi University - Department of Economics; Centre for Economic Policy Research (CEPR)

Massimo Motta

Universitat Pompeu Fabra

Lars Persson

Research Institute of Industrial Economics (IFN); Centre for Economic Policy Research (CEPR)

Abstract

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.

Suggested Citation

Fumagalli, Chiara and Motta, Massimo and Persson, Lars, *On the Anticompetitive Effect of Exclusive Dealing When Entry by Merger is Possible. The Journal of Industrial Economics, Vol. 57, Issue 4, pp. 785-811, December 2009, Available at SSRN: https://ssrn.com/abstract=1513607 or http://dx.doi.org/10.1111/j.1467-6451.2009.00401.x

Chiara Fumagalli (Contact Author)

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy
+39 02 5836 5311 (Phone)
+39 02 5836 5318 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Massimo Motta

Universitat Pompeu Fabra ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain

Lars Persson

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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