Vertical Foreclosure, Technological Choice, and Entry on the Intermediate Market
AbstractThis paper analyzes the profitability of vertical integration for an upstream monopoly facing a potential competitor. We show that it depends on the technology used by the firm when it integrates. We distinguish two types of technologies: standard technologies, used by nonintegrated firms, and nonstandard technologies, reserved for integrated firms and implying the complete foreclosure of nonintegrated firms. Vertical integration with the adoption of a nonstandard technology dominates vertical integration with the adoption of a standard technology and is profitable, as long as the degree of competition in the downstream industry is sufficiently low. Copyright (c) 2000 Massachusetts Institute of Technology.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Journal of Economics & Management Strategy.
Volume (Year): 9 (2000)
Issue (Month): 3 (06)
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Other versions of this item:
- Eric Avenel & Corinne Barlet, 2000. "Vertical Foreclosure, Technological Choice, and Entry on the Intermediate Market," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(2), pages 211-230, 06.
- Avenel, E. & Barlet, C., 2000. "Vertical Foreclosure, Technological Choice and Entry on the Intermediate Market," Papiers d'Economie MathÃÂ©matique et Applications 2000.18, UniversitÃ© PanthÃ©on-Sorbonne (Paris 1).
- L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
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- Roberto Hernan & Praveen Kujal, 2006.
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we061405, Universidad Carlos III, Departamento de Economía.
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- Hernán, Roberto & Kujal, Praveen, 2012. "Vertical integration, market floreclosure and quality investment," Open Access publications from Universidad Carlos III de Madrid info:hdl:10016/14968, Universidad Carlos III de Madrid.
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- Inderst, Roman & Valletti, Tommaso, 2011. "Incentives for input foreclosure," European Economic Review, Elsevier, vol. 55(6), pages 820-831, August.
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- Roman Inderst & Tommaso Valletti, 2006. "Market Analysis in the Presence of Indirect Constraints and Captive Sales," CEIS Research Paper 74, Tor Vergata University, CEIS.
- Lemarie, Stephane & Ramani, Shyama, 2003. "Analysis Of The Vertical Relationships Between Seed And Biotech Companies," 2003 Annual meeting, July 27-30, Montreal, Canada 22041, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- Éric Avenel & Stéphane Caprice, 2012. "Collusion and downstream entry in a vertically integrated industry," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201208, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
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