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Vertical foreclosure and multi-segment competition

Author

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  • Jullien, Bruno
  • Reisinger, Markus
  • Rey, Patrick

Abstract

This paper analyzes a supplier’s incentives to foreclose downstream entry when entrants have stronger positions in different market segments, thus bringing added value as well as competition. We first consider the case where wholesale contracts take the form of linear tariffs, and characterize the conditions under which the competition-intensifying effect dominates, thereby leading to foreclosure. We then show that foreclosure can still occur with non-linear tariffs, even coupled with additional provisions such as resale price maintenance.

Suggested Citation

  • Jullien, Bruno & Reisinger, Markus & Rey, Patrick, 2018. "Vertical foreclosure and multi-segment competition," Economics Letters, Elsevier, vol. 169(C), pages 31-34.
    • Handle: RePEc:eee:ecolet:v:169:y:2018:i:c:p:31-34
    DOI: 10.1016/j.econlet.2018.04.023
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    Cited by:

    1. Alexandre Carbonnel, 2021. "Can foreclosure benefit consumers? The case of innovation in new markets," Economics Bulletin, AccessEcon, vol. 41(3), pages 1471-1480.
    2. Niels Frank & Mitja Kleczka & Erion Shtjefanaku, 2025. "Mandated MVNO access and MNO investment in mobile network markets: evidence from Germany and Spain," Journal of Regulatory Economics, Springer, vol. 67(1), pages 29-60, June.
    3. Karbowski, Adam, 2019. "Greed and fear in downstream R&D games," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 32, pages 63-76.
    4. Frago Kourandi & Ioannis N. Pinopoulos, 2024. "Vertical contracting between a vertically integrated firm and a downstream rival," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 78(1), pages 181-217, August.

    More about this item

    Keywords

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    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law

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