Foreclosure and Profit Shifting with Partial Vertical Ownership

Matthias Hunold and Vasilisa Petrishcheva

No 41, Berlin School of Economics Discussion Papers from Berlin School of Economics

Abstract: We demonstrate how the incentives of firms that partially own their suppliers or customers to foreclose rivals depend on how the partial owner can extract profits from the target. Compared to a fully vertically integrated firm, a partial owner may obtain only a share of the target’s profit but influence the target’s strategy significantly. We show that the incentives for customer and input foreclosure can be higher, equal, or even lower with partial ownership than with a vertical merger, depending on how the protection of minority shareholders and transfer price regulations affect the scope for profit extraction.

Keywords: Foreclosure; Minority shareholdings; Partial ownership; Profit shifting; Vertical integration (search for similar items in EconPapers)
JEL-codes: G34 L22 L40 (search for similar items in EconPapers)
Pages: 74 pages
Date: 2024-06-06
New Economics Papers: this item is included in nep-com, nep-cta, nep-ind and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:bdp:dpaper:0041

DOI: 10.48462/opus4-5477

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