Template-type: ReDIF-Paper 1.0
Author-Name: Chiara Fumagalli
Author-Name: Massimo Motta
Title:Dynamic Vertical Foreclosure
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 it needs to be successful. In turn, monopolising the downstream market may prevent the incumbent from losing most of its future profits because: (a) it allows the incumbent to extract more 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.
Classification-JEL:K21, L41
Keywords: Inefficient foreclosure, Refusal to supply, Scale economies, Exclusion, Monopolisation
Length: 45 pages
Number: 1899
Creation-Date: 2018
File-URL: https://repec.unibocconi.it/baffic/baf/papers/cbafwp1899.pdf
File-Format: application/pdf
File-Size: 612
Handle: RePEc:baf:cbafwp:cbafwp1899