Citation

Discussion Paper Details

Please find the details for DP2647 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Downstream Competition, Foreclosure, and Vertical Integration

Author(s): Gilles Chemla

Publication Date: December 2000

Keyword(s): Bargaining, Competition, Contracts, Foreclosure and Vertical Integration

Programme Area(s): Industrial Organization

Abstract: This paper analyses the impact of competition among downstream firms on an upstream firm's payoff and on its incentive to vertically integrate when firms on both segments negotiate optimal contracts. We argue that tougher competition decreases the downstream industry profit, but improves the upstream firm's negotiation position. In particular, the upstream firm is better off encouraging competition when the downstream firms have high bargaining power. We derive implications on the interplay between vertical integration and competition among the downstream firms. The mere possibility of vertical integration may constitute a barrier to entry and may trigger strategic horizontal spin-offs or mergers. We discuss the impact of upstream competition on our results.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=2647

Bibliographic Reference

Chemla, G. 2000. 'Downstream Competition, Foreclosure, and Vertical Integration'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=2647