Exclusive dealing, entry, and mergers
AbstractWe 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.
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Bibliographic InfoPaper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 153.
Date of creation: 01 Jan 2006
Date of revision:
Countervailing Power; Exclusion; Buyers’ Fragmentation;
Other versions of this item:
- Chiara Fumagalli & Massimo Motta & Thomas Roende, 2009. "Exclusive dealing, entry, and mergers," CSEF Working Papers 225, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
- Fumagalli, Chiara & Motta, Massimo & Persson, Lars, 2005. "Exclusive Dealing, Entry and Mergers," CEPR Discussion Papers 4902, C.E.P.R. Discussion Papers.
- D4 - Microeconomics - - Market Structure and Pricing
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-01-24 (All new papers)
- NEP-BEC-2006-01-24 (Business Economics)
- NEP-COM-2006-01-24 (Industrial Competition)
- NEP-IND-2006-01-24 (Industrial Organization)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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