Incentives for input foreclosure
We analyze the incentives of a vertically integrated firm to foreclose downstream rivals in a model of upstream price competition between suppliers of only imperfectly substitutable inputs. Our main motivation is a critical assessment of common assertions that draw inferences from pre-merger observable variables to post-merger incentives to foreclose. In particular, we find that, contrary to some commonly expressed views, high margins on the downstream and low margins on the upstream market are not good predictors for the incentives of a newly integrated firm to foreclose rivals. Besides this contribution to policy, our model also extends existing results in the literature on vertical foreclosure through allowing for the interaction of product differentiation on the upstream and on the downstream market.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Roman Inderst & Tommaso Valletti, 2009. "Indirect versus Direct Constraints in Markets with Vertical Integration," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(3), pages 527-546, 09.
- Rey, Patrick & Tirole, Jean, 2003.
"A Primer on Foreclosure,"
IDEI Working Papers
203, Institut d'Économie Industrielle (IDEI), Toulouse, revised Nov 2005.
- Höffler, Felix & Schmidt, Klaus M., 2008.
"Two tales on resale,"
Munich Reprints in Economics
19443, University of Munich, Department of Economics.
- Höeffler, Felix & Schmidt, Klaus M., 2007. "Two Tales on Resale," CEPR Discussion Papers 6248, C.E.P.R. Discussion Papers.
- Höffler, Felix & Schmidt, Klaus M., 2007. "Two Tales on Resale," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 198, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
- Gérard Gaudet & Ngo Van Long, 1993.
"Vertical Integration, Foreclosure and Profits in the Presence of Double Marginalisation,"
Cahiers de recherche du Département des sciences économiques, UQAM
9308, Université du Québec à Montréal, Département des sciences économiques.
- Géarard Gaudet & Ngo Long, 1996. "Vertical Integration, Foreclosure, and profits in the Presence of Double Marginalization," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 5(3), pages 409-432, 09.
- Gérard Gaudet & Ngo Van Long, 1995. "Vertical Integration, Foreclosure and Profits in the Presence of Double Marginalisation," CIRANO Working Papers 95s-40, CIRANO.
- Damien Neven & Svend Albæk, 2007. "Economics at DG Competition 2006–2007," Review of Industrial Organization, Springer, vol. 31(2), pages 139-153, September.
- Ordover, Janusz A & Saloner, Garth & Salop, Steven C, 1990. "Equilibrium Vertical Foreclosure," American Economic Review, American Economic Association, vol. 80(1), pages 127-42, March.
- Avenel, E. & Barlet, C., 2000.
"Vertical Foreclosure, Technological Choice and Entry on the Intermediate Market,"
Papiers d'Economie MathÃ©matique et Applications
2000.18, UniversitÃ© PanthÃ©on-Sorbonne (Paris 1).
- Eric Avenel & Corinne Barlet, 2000. "Vertical Foreclosure, Technological Choice, and Entry on the Intermediate Market," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(3), pages 211-230, 06.
- 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.
- Warren-Boulton, Frederick R, 1974. "Vertical Control with Variable Proportions," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 783-802, July/Aug..
- Normann, Hans-Theo, 2009.
"Vertical integration, raising rivals' costs and upstream collusion,"
European Economic Review,
Elsevier, vol. 53(4), pages 461-480, May.
- Hans-Theo Normann, 2008. "Vertical Integration, Raising Rivals’ Costs and Upstream Collusion," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2008_30, Max Planck Institute for Research on Collective Goods.
- Ordover, Janusz & Shaffer, Greg, 2007. "Wholesale access in multi-firm markets: When is it profitable to supply a competitor?," International Journal of Industrial Organization, Elsevier, vol. 25(5), pages 1026-1045, October.
- Jay Pil Choi & Sang-Seung Yi, 2000.
"Vertical Foreclosure with the Choice of Input Specifications,"
RAND Journal of Economics,
The RAND Corporation, vol. 31(4), pages 717-743, Winter.
- Choi, J.P. & Yi, S.S., 1997. "Vertical Foreclosure with the Choice of Input Specifications," Discussion Paper 1997-16, Tilburg University, Center for Economic Research.
- Reiffen, David, 1992. "Equilibrium Vertical Foreclosure: Comment," American Economic Review, American Economic Association, vol. 82(3), pages 694-97, June.
- Hart, O. & Tirole, J., 1990. "Vertical Integration And Market Foreclosure," Working papers 548, Massachusetts Institute of Technology (MIT), Department of Economics.
- Alexander Schrader & Stephen Martin, 1998. "Vertical Market Participation," Review of Industrial Organization, Springer, vol. 13(3), pages 321-331, June.
- Michael A. Salinger, 1988. "Vertical Mergers and Market Foreclosure," The Quarterly Journal of Economics, Oxford University Press, vol. 103(2), pages 345-356.
- Richard S. Higgins, 1999. "Competitive vertical foreclosure," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 20(4), pages 229-237.
- Herman C. Quirmbach, 1992. "Sequential Vertical Integration," The Quarterly Journal of Economics, Oxford University Press, vol. 107(3), pages 1101-1111.
When requesting a correction, please mention this item's handle: RePEc:eee:eecrev:v:55:y:2011:i:6:p:820-831. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.