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

Chiara Fumagalli, Massimo Motta () and Lars Persson
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Chiara Fumagalli: Università Bocconi, Postal: European University Institute, Instituto di Economia Politica, Via Gobbi, I-20136 Milano, Italy

No 718, Working Paper Series from Research Institute of Industrial Economics

Abstract: 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.

Keywords: Technology Transfer; Inefficient Entry; Antitrust; Authority's Behavior (search for similar items in EconPapers)
JEL-codes: L24 L42 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2007-09-20
New Economics Papers: this item is included in nep-bec, nep-com and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: ON THE ANTICOMPETITIVE EFFECT OF EXCLUSIVE DEALING WHEN ENTRY BY MERGER IS POSSIBLE* (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:iuiwop:0718

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