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Backward integration, forward integration, and vertical foreclosure

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  • Spiegel, Yossi

Abstract

I show that partial vertical integration may either alleviates or exacerbate the concern for vertical foreclosure relative to full vertical integration and I examine its implications for consumer welfare.

Suggested Citation

  • Spiegel, Yossi, 2013. "Backward integration, forward integration, and vertical foreclosure," CEPR Discussion Papers 9617, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:9617
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    References listed on IDEAS

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    1. Oliver Hart & Jean Tirole, 1990. "Vertical Integration and Market Foreclosure," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(1990 Micr), pages 205-286.
    2. Justine S. Hastings & Richard J. Gilbert, 2005. "Market Power, Vertical Integration And The Wholesale Price Of Gasoline," Journal of Industrial Economics, Wiley Blackwell, vol. 53(4), pages 469-492, December.
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    4. Dong Chen & David Waterman, 2007. "Vertical Ownership, Program Network Carriage, and Tier Positioning in Cable Television: An Empirical Study," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 30(3), pages 227-251, May.
    5. Tasneem Chipty, 2001. "Vertical Integration, Market Foreclosure, and Consumer Welfare in the Cable Television Industry," American Economic Review, American Economic Association, vol. 91(3), pages 428-453, June.
    6. David Gilo & Yossi Spiegel, 2011. "Partial Vertical Integration in Telecommunication and Media Markets in Israel," Israel Economic Review, Bank of Israel, vol. 9(1), pages 29-51.
    7. Chen, Yongmin, 2001. "On Vertical Mergers and Their Competitive Effects," RAND Journal of Economics, The RAND Corporation, vol. 32(4), pages 667-685, Winter.
    8. Patrick Bolton & Michael D. Whinston, 1993. "Incomplete Contracts, Vertical Integration, and Supply Assurance," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 60(1), pages 121-148.
    9. 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.
    10. Loertscher, Simon & Reisinger, Markus, 2009. "Competitive E?ects of Vertical Integration with Downstream Oligopsony and Oligopoly," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 278, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    11. Géarard Gaudet & Ngo Van 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, September.
    12. Michael A. Salinger, 1988. "Vertical Mergers and Market Foreclosure," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 103(2), pages 345-356.
    13. Ordover, Janusz A & Saloner, Garth & Salop, Steven C, 1992. "Equilibrium Vertical Foreclosure: Reply," American Economic Review, American Economic Association, vol. 82(3), pages 698-703, June.
    14. Marie-Laure Allain & Claire Chambolle & Patrick Rey, 2010. "Vertical Integration, Innovation and Foreclosure," Working Papers hal-00544494, HAL.
    15. Nadav Levy & Yossi Spiegel & David Gilo, 2018. "Partial Vertical Integration, Ownership Structure, and Foreclosure," American Economic Journal: Microeconomics, American Economic Association, vol. 10(1), pages 132-180, February.
    16. Ching‐To Albert Ma, 1997. "Option Contracts and Vertical Foreclosure," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(4), pages 725-753, December.
    17. Lucy White, 2007. "Foreclosure with Incomplete Information," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 16(2), pages 507-535, June.
    18. William J. Baumol & Janusz A. Ordover, 1994. "On the perils of vertical control by a partial owner of a downstream enterprise," Revue d'Économie Industrielle, Programme National Persée, vol. 69(1), pages 7-20.
    19. Buehler, Stefan & Schmutzler, Armin, 2008. "Intimidating competitors -- Endogenous vertical integration and downstream investment in successive oligopoly," International Journal of Industrial Organization, Elsevier, vol. 26(1), pages 247-265, January.
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    Cited by:

    1. Marie-Laure Allain & Claire Chambolle & Patrick Rey, 2016. "Vertical Integration as a Source of Hold-up," Review of Economic Studies, Oxford University Press, vol. 83(1), pages 1-25.
    2. Liu, Xingyi, 2016. "Vertical integration and innovation," International Journal of Industrial Organization, Elsevier, vol. 47(C), pages 88-120.
    3. Matthias Hunold & Vasilisa Petrishcheva, 2022. "Foreclosure and Tunneling with Partial Vertical Ownership," CEPA Discussion Papers 57, Center for Economic Policy Analysis.
    4. Hunold, Matthias, 2020. "Non-Discriminatory Pricing, Partial Backward Ownership, and Entry Deterrence," International Journal of Industrial Organization, Elsevier, vol. 70(C).
    5. Hunold, Matthias & Petrishcheva, Vasilisa, 2022. "Foreclosure and tunneling with partial vertical ownership," DICE Discussion Papers 391, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    6. Konstantinos G. Papadopoulos & Emmanuel Petrakis & Panagiotis Skartados, 2022. "The ambiguous competitive effects of passive partial forward ownership," Southern Economic Journal, John Wiley & Sons, vol. 89(2), pages 540-568, October.
    7. Mariola Sánchez & José Antonio Belso‐Martínez & María José López‐Sánchez & Adrián Nerja, 2022. "Incentives to exclusive and non‐exclusive technology licensing under partial vertical integration," Manchester School, University of Manchester, vol. 90(2), pages 171-189, March.
    8. Hunold, Matthias & Schlütter, Frank, 2019. "Vertical financial interest and corporate influence," DICE Discussion Papers 309, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    9. Matthias Hunold & Shiva Shekhar, 2022. "Supply Chain Innovations and Partial Ownership," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 60(1), pages 109-145, February.
    10. Papadopoulos, Konstantinos G. & Petrakis, Emmanuel & Skartados, Panagiotis, 2021. "The ambiguous competitive effects of passive partial forward integration," UC3M Working papers. Economics 33354, Universidad Carlos III de Madrid. Departamento de Economía.
    11. Spindler, Christian & Woll, Oliver & Schober, Dominik, 2018. "Sharing is not caring: Backward integration of consumers," ZEW Discussion Papers 18-006, ZEW - Leibniz Centre for European Economic Research.

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    More about this item

    Keywords

    Vertical integration; Backward integration; Forward integration; Vertical foreclosure; Controlling and passive integration; investment; Consumer surplus;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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