Vertical Integration and Market Foreclosure: Empirical Evidence from the Korean Movie Industry

Yun Jeong Choi, Jong-Hee Hahn and Hojung Kim
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Yun Jeong Choi: Yonsei University
Hojung Kim: Korea Information Society Development Institute

Korean Economic Review, 2019, vol. 35, 417-438

Abstract: We examine how the foreclosure incentive of firms is affected by the degree of vertical integration in related markets, which is measured by the number of vertically integrated firms. We specifically investigate how the exhibition behavior of the vertically integrated and separated theaters in the Korean movie industry responds to a change in the degree of vertical integration by using daily screening data over a 7-year period. The vertical separation of a previously integrated firm serves as a structural break. Our results show that the foreclosure incentive of the vertically integrated firms generally weakens as the degree of vertical integration decreases. However, the existing integrated firms strengthen their intensity of foreclosure toward the newly separated firm after the breakup, perhaps to weaken the market position of the previously integrated rival. Moreover, we find that the newly separated firm behaves similarly to other independent firms, with no sign of foreclosure behavior.

Keywords: Vertical Integration; Foreclosure; Market Structure; Movie Industry (search for similar items in EconPapers)
JEL-codes: L12 L41 L82 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (1)

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