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Vertical Foreclosure with the Choice of Input Specifications

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  • Choi, J.P.

    (Tilburg University, School of Economics and Management)

  • Yi, S.S.

Abstract

We develop an equilibrium model of vertical foreclosure with the choice of input specifications. Vertical foreclosure occurs as the upstream division of the integrated firm makes a specialized input for its sister downstream division while it would, as an independent firm, provide a generalized input. The changes in incentives with vertical integration can be explained by the externalities the choice of a specialized input entails; vertical integration allows the upstream firm to internalize the benefit of raising the rival firm's costs at the downstream level. We derive conditions for equilibrium vertical foreclosure to occur and discuss its welfare consequences.
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Choi, J.P. & Yi, S.S., 1997. "Vertical Foreclosure with the Choice of Input Specifications," Other publications TiSEM db1a85b2-f6d1-42ce-be73-6, Tilburg University, School of Economics and Management.
  • Handle: RePEc:tiu:tiutis:db1a85b2-f6d1-42ce-be73-60f79c2febcc
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    References listed on IDEAS

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