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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

Suggested Citation

  • David Mandy & David Sappington, 2007. "Incentives for sabotage in vertically related industries," Journal of Regulatory Economics, Springer, vol. 31(3), pages 235-260, June.
    • Handle: RePEc:kap:regeco:v:31:y:2007:i:3:p:235-260
    DOI: 10.1007/s11149-006-9015-7
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    More about this item

    Keywords

    Regulation; Sabotage; Vertically integrated industries; L51; L10; L22;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General

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