Foreclosure and tunneling with partial vertical ownership

Matthias Hunold and Vasilisa Petrishcheva

No 391, DICE Discussion Papers from Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE)

Abstract: We study the incentives of firms that hold partial vertical ownership to foreclose rivals. Compared to a full vertical merger, with partial ownership, a firm may obtain only part of the target's profit but may nevertheless be able to influence the target's strategy significantly. The target may be either a supplier or a customer, which opens the scope for either input foreclosure or customer foreclosure. We show that the incentives to foreclose can be higher, equal, or even lower with partial ownership than with a vertical merger, depending on how the protection of minority shareholders and transfer price regulations are specified.

Keywords: Backward ownership; Entry deterrence; Foreclosure; Minority shareholdings; Partial ownership; Uniform pricing; Vertical integration (search for similar items in EconPapers)
JEL-codes: G34 L22 L40 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-com, nep-cta, nep-ind, nep-mic and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:dicedp:391

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