On the perils of vertical control by a partial owner of a downstream enterprise

William Baumol and Janusz A. Ordover

Revue d'Économie Industrielle, 1994, vol. 69, issue 1, 7-20

Abstract: [eng] The paper examines the various cases which can exist in the vertical relation between an upstream enterprise, owner of a bottleneck facility, and a downstream enterprise, obliged to use this facility. It shows that (only) in the case in which the downstream firm is a partial owner to the upstream firm, the possibility exists for a diversion of business, away from the most efficient solution. [fre] Cet article examine les divers cas de figure que peut revêtir la relation verticale entre une entreprise détenant les actifs à titre exclusif et une entreprise de produits finals obligée de faire appel à cette entreprise amont. Il montre que dans le cas (et uniquement dans ce cas) où l'entreprise aval contrôle partiellement l'entreprise amont elle peut détourner une partie de l'activité, au détriment de la solution optimale.

Date: 1994
Note: DOI:10.3406/rei.1994.1534
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