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Incentives for sabotage in vertically related industries

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  • David Mandy

    ()

  • David Sappington

    ()

Abstract

We show that the incentives of a vertically integrated supplier to “sabotage” the activities of downstream rivals can vary with both the type of sabotage and the nature of downstream competition. Cost-increasing sabotage is typically profitable under both Cournot and Bertrand competition. In contrast, demand-reducing sabotage is often profitable under Cournot competition, but unprofitable under Bertrand competition. Incentives for sabotage can vary non-monotonically with the degree of product differentiation. Copyright Springer Science+Business Media, LLC 2007

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Bibliographic Info

Article provided by Springer in its journal Journal of Regulatory Economics.

Volume (Year): 31 (2007)
Issue (Month): 3 (June)
Pages: 235-260

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Handle: RePEc:kap:regeco:v:31:y:2007:i:3:p:235-260

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Web page: http://www.springerlink.com/link.asp?id=100298

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Keywords: Regulation; Sabotage; Vertically integrated industries; L51; L10; L22;

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References

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Citations

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Cited by:
  1. Michiel Bijlsma & Viktoria Kocsis & Victoria Shestalova & Gijsbert Zwart, 2008. "Vertical foreclosure: a policy framework," CPB Document 157, CPB Netherlands Bureau for Economic Policy Analysis.
  2. Stefan Buehler & Dennis Gaertner & Daniel Halbheer, 2004. "Deregulating Network Industries: Dealing with Price-Quality Tradeoffs," SOI - Working Papers 0402, Socioeconomic Institute - University of Zurich, revised Oct 2005.
  3. Schober, Dominik, 2013. "Static vs. dynamic impacts of unbundling: Electricity markets in South America," ZEW Discussion Papers 13-033, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  4. Viktória Kocsis & Paul Bijl, 2007. "Network neutrality and the nature of competition between network operators," International Economics and Economic Policy, Springer, vol. 4(2), pages 159-184, August.
  5. Mattos, César, 2009. "Open access policies, regulated charges and non-price discrimination in telecommunications," Information Economics and Policy, Elsevier, vol. 21(4), pages 253-260, November.
  6. David Sappington, 2005. "Regulating Service Quality: A Survey," Journal of Regulatory Economics, Springer, vol. 27(2), pages 123-154, November.
  7. Mark A. Jamison, 2004. "Effects of Industry Concentration on Quality Choices for Network Connectivity," Working Papers 04-08, NET Institute.
  8. Alessandro Avenali & Giorgio Matteucci & Pierfrancesco Reverberi, 2010. "How does vertical industry structure affect investment in infrastructure quality?," DIS Technical Reports 2010-08, Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza".
  9. David Sappington & Dennis Weisman, 2005. "Self-Sabotage," Journal of Regulatory Economics, Springer, vol. 27(2), pages 155-175, November.
  10. Hervas-Drane, Andres, 2011. "Non-cost-raising discrimination: A rationale for functional separation in broadband open access," IESE Research Papers D/942, IESE Business School.
  11. Felix Höffler & Sebastian Kranz, 2007. "Imperfect Legal Unbundling of Monopolistic Bottlenecks," Bonn Econ Discussion Papers bgse16_2007, University of Bonn, Germany.
  12. Höffler, Felix & Kranz, Sebastian, 2011. "Legal unbundling can be a golden mean between vertical integration and ownership separation," International Journal of Industrial Organization, Elsevier, vol. 29(5), pages 576-588, September.
  13. Debashis Pal & David Sappington & Ying Tang, 2012. "Sabotaging cost containment," Journal of Regulatory Economics, Springer, vol. 41(3), pages 293-314, June.
  14. David Sappington & J. Sidak, 2003. "Incentives for Anticompetitive Behavior by Public Enterprises," Review of Industrial Organization, Springer, vol. 22(3), pages 183-206, May.
  15. Toshihiro Matsumura & Noriaki Matsushima, 2012. "Regulated Input Price, Vertical Separation, and Leadership in Free Entry Markets," ISER Discussion Paper 0853, Institute of Social and Economic Research, Osaka University.
  16. Nikogosian, Vigen & Veith, Tobias, 2011. "Vertical integration, separation and non-price discrimination: An empirical analysis of German electricity markets for residential customers," ZEW Discussion Papers 11-069, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  17. David Sappington, 2006. "Regulation in Vertically-Related Industries: Myths, Facts, and Policy," Review of Industrial Organization, Springer, vol. 28(1), pages 3-16, 02.
  18. Isabel Soares & Paula Sarmento, 2012. "Unbundling in the Telecommunications and the Electricity Sectors: How Far should it Go?," European Research Studies Journal, European Research Studies Journal, vol. 0(Special I), pages 157-194.
  19. Foros, Øystein & Kind, Hans Jarle & Sand, Jan Yngve, 2009. "Entry may increase network providers' profit," Telecommunications Policy, Elsevier, vol. 33(9), pages 486-494, October.

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