AbstractWe analyze the incentives of a vertically-integrated producer (VIP) to engage in “self-sabotage”.Self-sabotage occurs when a VIP intentionally increases its upstream costs and/or reduces the quality of its upstream product. We identify conditions under which self-sabotage is profitable for the VIP even though it raises symmetrically the cost of the upstream product to all downstream producers and/or reduces symmetrically the quality of all downstream products. Under specified conditions, self-sabotage can enable a VIP to disadvantage downstream rivals differentially without violating parity requirements. Copyright Springer Science+Business Media, Inc. 2005
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Bibliographic InfoArticle provided by Springer in its journal Journal of Regulatory Economics.
Volume (Year): 27 (2005)
Issue (Month): 2 (November)
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Web page: http://www.springerlink.com/link.asp?id=100298
regulation; parity; sabotage;
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- David Mandy & David Sappington, 2007.
"Incentives for sabotage in vertically related industries,"
Journal of Regulatory Economics,
Springer, vol. 31(3), pages 235-260, June.
- David Mandy & David E. M. Sappington, 2004. "Incentives for Sabotage in Vertically Related Industries," Working Papers 0404, Department of Economics, University of Missouri, revised 16 Dec 2004.
- Bustos Alvaro E & Galetovic Alexander, 2009.
"Vertical Integration and Sabotage with a Regulated Bottleneck Monopoly,"
The B.E. Journal of Economic Analysis & Policy,
De Gruyter, vol. 9(1), pages 1-52, September.
- Alvaro Bustos & Alexander Galetovic, 2003. "Vertical Integration and Sabotage in Regulated Industries," Documentos de Trabajo 164, Centro de Economía Aplicada, Universidad de Chile.
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