On the Anticompetitive Effect of Exclusive Dealing when Entry by Merger is Possible
AbstractWe 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.
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Bibliographic InfoPaper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 718.
Length: 25 pages
Date of creation: 20 Sep 2007
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Technology Transfer; Inefficient Entry; Antitrust; Authority's Behavior;
Find related papers by JEL classification:
- L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
- L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-10-06 (All new papers)
- NEP-BEC-2007-10-06 (Business Economics)
- NEP-COM-2007-10-06 (Industrial Competition)
- NEP-MIC-2007-10-06 (Microeconomics)
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