Exclusive Dealing, Entry and Mergers

34 Pages Posted: 2 Jun 2005

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)

Date Written: February 2005

Abstract

We extend the literature on exclusive dealing 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 than in the case where entry can occur only by installing new capacity. Third, exclusive dealing reduces welfare because (i) it may trigger entry through merger whereas de novo entry would be socially optimal, and (ii) it may deter entry altogether. Finally, we show that when exclusive deals include a commitment on future prices they will increase welfare.

Keywords: Exclusive dealing, entry deterrence, mergers, antitrust

JEL Classification: K21, L10, L40

Suggested Citation

Fumagalli, Chiara and Motta, Massimo and Persson, Lars, Exclusive Dealing, Entry and Mergers (February 2005). Available at SSRN: https://ssrn.com/abstract=734364

Chiara Fumagalli

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 (Contact Author)

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

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
27
Abstract Views
1,130
PlumX Metrics