Dynamic Vertical Foreclosure

Chiara Fumagalli and Massimo Motta ()

No 12498, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper shows that vertical foreclosure can have a dynamic rationale. By refusing to supply an efficient downstream rival, a vertically integrated incumbent sacrifices current profits but can exclude the rival by depriving it of the critical profits (or sales) it needs to be successful. In turn, monopolising the downstream market may prevent the incumbent from losing its future profits because: (a) it allows the incumbent to extract rents from an efficient upstream rival if future upstream entry cannot be discouraged; or (b) it also deters future upstream entry by weakening competition for the input and reducing the post-entry profits of the prospective upstream competitor.

Keywords: Inefficient foreclosure; Refusal to supply; Exclusion; Monopolisation (search for similar items in EconPapers)
JEL-codes: K21 L41 (search for similar items in EconPapers)
Date: 2017-12
New Economics Papers: this item is included in nep-com and nep-mic
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Related works:
Journal Article: Dynamic Vertical Foreclosure (2020)
Working Paper: Dynamic Vertical Foreclosure (2019)
Working Paper: Dynamic Vertical Foreclosure (2019)
Working Paper: Dynamic Vertical Foreclosure (2018)
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