Dependencies vs. Merge Modules

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I'm trying to gain a better conceptual understanding of when I might
use merge modules. So far I can't come up with a reason to use them in
most of my projects, and I want to make sure I'm not missing something.

Whenever I create a Setup Project for an application I'm working on,
Visual Studio automatically detects that application's dependencies.
These dependencies always correspond to the DLLs I have referenced in
the application project's References folder.

I would expect merge modules to be a vehicle by which an application's
dependencies (say, a collection of DLLs) are distributed. If I'm
working on two applications that reference the same class library, then
a merge module for that library should be created and included with
each application's setup project. It seems like this (merge module
creation) should happen for -every- referenced DLL or project that
stands to be shared between applications. Most class libraries are
developed in the spirit of sharing, so it seems natural to me that all
referenced DLLs (or projects) should have their own merge module.

But whenever I create a Setup Project for any application, all the
application's dependencies are automatically detected and wrapped up
into the .msi as DLLs. Merge modules never come into play
automatically, which I guess is what I would expect. Common knowledge
in the community seems to indictate that all those auto-dependencies
should be manually excluded, then merge modules included into the setup
project separately. This seems like a lot of work when the alternative
is to just let the IDE store my dependencies separately. What do I
really gain by using merge modules?

--
Jeff S.

.

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