Non-Discriminatory Pricing, Partial Backward Ownership, and Entry Deterrence

Matthias Hunold

International Journal of Industrial Organization, 2020, vol. 70, issue C

Abstract: This article demonstrates that entry deterrence can occur when downstream incumbents hold non-controlling ownership shares of a supplier that does not price-discriminate. Such backward ownership implies a rebate on the input price for the incumbents and a competitive disadvantage for downstream entrants. An industry can use non-controlling ownership to change the pricing of a supplier in a way that appears to be accommodating but in fact deters entry. The supplier benefits from an obligation or a commitment to supply the customers under equal terms, as this induces profitable sales of ownership stakes to incumbent downstream firms.

Keywords: Backward ownership; Entry deterrence; Foreclosure; Minority shareholdings; Non-controlling partial ownership; Uniform pricing; Vertical integration (search for similar items in EconPapers)
JEL-codes: G34 L22 L40 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:70:y:2020:i:c:s0167718720300370

DOI: 10.1016/j.ijindorg.2020.102615

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