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Targeting efforts to raise rivals' costs: Moving from “Whether” to “Whom”

Author

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  • Mandy, David M.
  • Mayo, John W.
  • Sappington, David E.M.

Abstract

Considerable attention has been devoted to determining when a vertically integrated provider (VIP) of an essential input will disadvantage its rivals anticompetitively. In contrast, little attention has been devoted to identifying which of its rivals a VIP will target for cost-raising activities. We identify industry and firm characteristics that render a particular rival a more likely target for a VIP's cost-raising activities. The potential for targeted “sabotage” introduces many subtleties, including the fact that a VIP typically prefers to sabotage an industry leader under retail quantity competition but an industry follower under price competition.

Suggested Citation

  • Mandy, David M. & Mayo, John W. & Sappington, David E.M., 2016. "Targeting efforts to raise rivals' costs: Moving from “Whether” to “Whom”," International Journal of Industrial Organization, Elsevier, vol. 46(C), pages 1-15.
    • Handle: RePEc:eee:indorg:v:46:y:2016:i:c:p:1-15
    DOI: 10.1016/j.ijindorg.2016.01.002
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    Cited by:

    1. Sreya Kolay & Rajeev K. Tyagi, 2022. "On the Effects of Raised Rival’s Costs," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 60(4), pages 567-586, June.
    2. David P. Brown & David E. M. Sappington, 2021. "On the profitability of self‐sabotage," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 54(1), pages 68-91, February.

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    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • L5 - Industrial Organization - - Regulation and Industrial Policy

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