Dynamic Vertical Foreclosure

Chiara Fumagalli () and Massimo Motta ()
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Chiara Fumagalli: Università Bocconi, CSEF and CEPR

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

Abstract: This paper shows that vertical foreclosure can have a dynamic rationale. By refusing to supply an efficient downstream rival, a vertically integrated incumbent sacrifices current profits but can exclude the rival by depriving it of the critical profits it needs to be successful. In turn, monopolizing the downstream market may prevent the incumbent from losing most of its future profits because: (a) it allows the incumbent to extract more rents from an efficient upstream rival if future upstream entry cannot be discouraged; or (b) it also deters future upstream entry by weakening competition for the input and reducing the post-entry profits of the prospective upstream competitor.

Keywords: Inefficient foreclosure; Refusal to supply; Scale economies; Exclusion; Monopolization (search for similar items in EconPapers)
JEL-codes: K21 L41 (search for similar items in EconPapers)
Date: 2019-01-14
New Economics Papers: this item is included in nep-com, nep-law and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.csef.it/WP/wp522.pdf (application/pdf)

Related works:
Working Paper: Dynamic Vertical Foreclosure (2019)
Working Paper: Dynamic Vertical Foreclosure (2018)
Working Paper: Dynamic Vertical Foreclosure (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:sef:csefwp:522

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