Safe harbor input prices and market exclusion

Dennis Weisman ()

Journal of Regulatory Economics, 2014, vol. 46, issue 2, 226-236

Abstract: An essential input price that is “too high” relative to the downstream price leads to inefficient foreclosure and one that is “too low” induces the vertically-integrated firm to engage in non-price discrimination. Displacement ratios are used to derive the range of safe harbor (downstream/upstream) margin ratios within which no market exclusion arises in equilibrium. The range of admissible margin ratios is increasing in the degree of product differentiation and reduces to a single ratio in the limit as the products become homogeneous. A key policy finding is that complementary price-ceiling and price-floor constraints can prevent both forms of market exclusion. Copyright Springer Science+Business Media New York 2014

Keywords: Input prices; Vertical integration; Foreclosure; Sabotage; L51; L96 (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1007/s11149-014-9255-x

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