Self-Sabotage

David Sappington and Dennis Weisman ()

Journal of Regulatory Economics, 2005, vol. 27, issue 2, 155-175

Abstract: We analyze the incentives of a vertically-integrated producer (VIP) to engage in “self-sabotage”.Self-sabotage occurs when a VIP intentionally increases its upstream costs and/or reduces the quality of its upstream product. We identify conditions under which self-sabotage is profitable for the VIP even though it raises symmetrically the cost of the upstream product to all downstream producers and/or reduces symmetrically the quality of all downstream products. Under specified conditions, self-sabotage can enable a VIP to disadvantage downstream rivals differentially without violating parity requirements. Copyright Springer Science+Business Media, Inc. 2005

Keywords: regulation; parity; sabotage (search for similar items in EconPapers)
Date: 2005
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DOI: 10.1007/s11149-004-5342-8

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