Entry Through a Rival: Controlled Inclusion in Segmented Markets

Yassine Badra (), Edouard Cottin-Euziol () and Bertrand Chopard ()
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Yassine Badra: PHEEAC - Pouvoirs, Histoire, Esclavages, Environnement Atlantique Caraïbe - CNRS - Centre National de la Recherche Scientifique - Université des Antilles (Pôle Martinique) - UA - Université des Antilles
Edouard Cottin-Euziol: ACT - Analyse des Crises et Transitions - LABEX ICCA - UP13 - Université Paris 13 - Université Sorbonne Nouvelle - Paris 3 - CNRS - Centre National de la Recherche Scientifique - UPCité - Université Paris Cité - Université Sorbonne Paris Nord - Université Sorbonne Paris Nord, PHEEAC - Pouvoirs, Histoire, Esclavages, Environnement Atlantique Caraïbe - CNRS - Centre National de la Recherche Scientifique - Université des Antilles (Pôle Martinique) - UA - Université des Antilles
Bertrand Chopard: UPCité - Université Paris Cité

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Abstract: In segmented markets, an external firm may enter only by relying on a local rival. We study an agreement under which the incumbent manufactures for the entrant while competing with it downstream. Local production lowers market-access costs, but a per-unit markup allows the incumbent to raise the entrant's effective marginal cost. Subject to bilateral participation, the agreement can create entry when autonomous entry is unprofitable. Yet this inclusion is controlled: we identify conditions under which the equilibrium markup softens competition and raises both prices above their counterfactual autonomousentry levels. Cooperation between rivals can thus expand market access while limiting its competitive impact, with welfare depending on the balance between cost savings and competitive distortions.

Keywords: Entry; Vertical relations; Raising rivals' costs; local manufacturing; segmented markets; competition policy (search for similar items in EconPapers)
Date: 2026-10-08
Note: View the original document on HAL open archive server: https://hal.science/hal-05785281v1
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