| Author: | Chemla, G. |
| Title: | Downstream Competition, Foreclosure, and Vertical Integration |
| Journal: | Journal of Economics & Management Strategy
2003 : VOL. 12:2, p. 261-289 |
| Index terms: | COMPETITION COMPANIES MANAGEMENT |
| Language: | eng |
| Abstract: | This paper analyzes the effect of competition among downstream firms on an upstream firm's payoff and on its incentive to integrate vertically when firms in both segments negotiate optimal contracts. The authors argue that as downstream competition becomes more intense, the upstream firm obtains a larger share of a smaller downstream industry profit. The upstream firm may encourage downstream competition (even excessively) in response to high downstream bargaining power. The option of vertical integration may be a barrier to entry downstream and may trigger strategic horizontal spinoffs or mergers. The authors extend the analysis to upstream competition. |
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