ON THE ANTICOMPETITIVE EFFECT OF EXCLUSIVE DEALING WHEN ENTRY BY MERGER IS POSSIBLE <link rid="fn32">-super-* </link>

<heading id="h1" level="1" implicit="yes" format="display">Abstract</heading> We extend the literature on exclusive dealing by allowing the incumbent and the potential entrant to merge. This uncovers new effects. First, exclusive dealing 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 of exclusivity. Third, despite allowing the more efficient technology to find its way into the industry, exclusive dealing reduces welfare because (i) it may trigger entry through merger whereas independent entry would be socially optimal and (ii) it may deter entry altogether. Copyright 2009 The Authors. Journal compilation 2009 Blackwell Publishing Ltd. and the Editorial Board of The Journal of Industrial Economics.