Incentives for Sabotage in Vertically Related Industries
We show that the incentives a vertically integrated supplier may have to disadvantage or "sabotage" the activities of downstream rivals 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.
|Date of creation:||16 Dec 2004|
|Date of revision:||16 Dec 2004|
|Publication status:||Forthcoming in Journal of Regulatory Economics (2006)|
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