Exclusive dealing, entry, and mergers
Chiara Fumagalli (),
Massimo Motta () and
CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy
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 (ii) it may deter entry altogether. Finally, we show that when exclusive deals include a commitment to future prices, they will increase welfare.
Keywords: Countervailing Power; Exclusion; Buyers’ Fragmentation (search for similar items in EconPapers)
JEL-codes: D4 L13 L41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-com and nep-ind
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Working Paper: Exclusive dealing, entry, and mergers (2009)
Working Paper: Exclusive Dealing, Entry and Mergers (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:sef:csefwp:153
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