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Upstream Market Foreclosure

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  • Jean J. Gabszewicz
  • Skerdilajda Zanaj

Abstract

This paper investigates how an incumbent monopolist can weaken potential rivals or deter entry in the output market by manipulating the access of these rivals in the input market. We analyse two polar cases. In the first one, the input market is assumed to be competitive with the input being supplied inelastically. We show that this situation opens the door to entry deterrence. Then, we assume that the input is supplied by a single seller who chooses the input price. In this case, we show that entry deterrence can be reached only through merger with the seller of the input.

Suggested Citation

  • Jean J. Gabszewicz & Skerdilajda Zanaj, 2008. "Upstream Market Foreclosure," Bulletin of Economic Research, Wiley Blackwell, vol. 60(1), pages 13-26, January.
    • Handle: RePEc:bla:buecrs:v:60:y:2008:i:1:p:13-26
    DOI: 10.1111/j.1467-8586.2007.00269.x
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    References listed on IDEAS

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    1. Salop, Steven C & Scheffman, David T, 1983. "Raising Rivals' Costs," American Economic Review, American Economic Association, vol. 73(2), pages 267-271, May.
    2. Martin, Stephen & Normann, Hans-Theo & Snyder, Christopher M, 2001. "Vertical Foreclosure in Experimental Markets," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 466-496, Autumn.
    3. Jean Gabszewicz & Didier Laussel & Tanguy Ypersele & Skerdilajda Zanaj, 2013. "Market Games in Successive Oligopolies," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 15(3), pages 397-410, June.
    4. Dixit, Avinash, 1980. "The Role of Investment in Entry-Deterrence," Economic Journal, Royal Economic Society, vol. 90(357), pages 95-106, March.
    5. Salop, Steven C & Scheffman, David T, 1987. "Cost-Raising Strategies," Journal of Industrial Economics, Wiley Blackwell, vol. 36(1), pages 19-34, September.
    6. Aghion, Philippe & Bolton, Patrick, 1987. "Contracts as a Barrier to Entry," American Economic Review, American Economic Association, vol. 77(3), pages 388-401, June.
    7. Ordover, Janusz A & Saloner, Garth & Salop, Steven C, 1990. "Equilibrium Vertical Foreclosure," American Economic Review, American Economic Association, vol. 80(1), pages 127-142, March.
    8. Granitz, Elizabeth & Klein, Benjamin, 1996. "Monopolization by "Raising Rivals' Costs": The Standard Oil Case," Journal of Law and Economics, University of Chicago Press, vol. 39(1), pages 1-47, April.
    9. Michael A. Salinger, 1988. "Vertical Mergers and Market Foreclosure," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 103(2), pages 345-356.
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    Cited by:

    1. Sanin, Maria-Eugenia & Zanaj, Skerdilajda, 2012. "Clean Technology Adoption Under Cournot Competition," Strategic Behavior and the Environment, now publishers, vol. 2(2), pages 159-172, July.
    2. Olivier Chatain, 2014. "How do strategic factor markets respond to rivalry in the product market?," Strategic Management Journal, Wiley Blackwell, vol. 35(13), pages 1952-1971, December.
    3. Éric Avenel & Clémence Christin, 2011. "Equilibrium strategic overbuying," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201205, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
    4. Andre Jungmittag, 2018. "The Direct and Indirect Effects of Product Market Regulations in the Retail Trade Sector," JRC Research Reports JRC112222, Joint Research Centre.
    5. Emanuele Forlani, 2012. "Competition in Services and Efficiency of Manufacturing Firms:Does “Liberalization” Matter?," LICOS Discussion Papers 31112, LICOS - Centre for Institutions and Economic Performance, KU Leuven.

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    More about this item

    JEL classification:

    • D20 - Microeconomics - - Production and Organizations - - - General
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts

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