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Upstream market foreclosure

Author

Listed:
  • Jean j., GABSZEWICZ

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Center for Operations Research and Econometrics (CORE))

  • Skerdilajda, ZANAJ

Abstract

This paper investigates how an incumbent monopolistic can weaken potential rivals or deter entry in the output market by manipulating the access of these rivals in the input market. We analyze two polar cases. In the first one, the input market is assumed to be competitive with the input being supplied inelastically. We show that the situation opens the door to entry deterrence. Then, we assume that the input is supplied by a single seller who chooses the input price. In this case we show that entry deterrence can be reached only through merger with the seller of the input.

Suggested Citation

  • Jean j., GABSZEWICZ & Skerdilajda, ZANAJ, 2006. "Upstream market foreclosure," Discussion Papers (ECON - Département des Sciences Economiques) 2006024, Université catholique de Louvain, Département des Sciences Economiques.
    • Handle: RePEc:ctl:louvec:2006024
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    File URL: http://sites.uclouvain.be/econ/DP/IRES/2006-24.pdf
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    References listed on IDEAS

    as
    1. Dixit, Avinash, 1980. "The Role of Investment in Entry-Deterrence," Economic Journal, Royal Economic Society, vol. 90(357), pages 95-106, March.
    2. Jean Gabszewicz & Didier Laussel & Tanguy Ypersele & Skerdilajda Zanaj, 2013. "Market Games in Successive Oligopolies," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 15(3), pages 397-410, June.
    3. Ordover, Janusz A & Saloner, Garth & Salop, Steven C, 1990. "Equilibrium Vertical Foreclosure," American Economic Review, American Economic Association, vol. 80(1), pages 127-142, March.
    4. Michael A. Salinger, 1988. "Vertical Mergers and Market Foreclosure," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 103(2), pages 345-356.
    5. Salop, Steven C & Scheffman, David T, 1983. "Raising Rivals' Costs," American Economic Review, American Economic Association, vol. 73(2), pages 267-271, May.
    6. Salop, Steven C & Scheffman, David T, 1987. "Cost-Raising Strategies," Journal of Industrial Economics, Wiley Blackwell, vol. 36(1), pages 19-34, September.
    7. Aghion, Philippe & Bolton, Patrick, 1987. "Contracts as a Barrier to Entry," American Economic Review, American Economic Association, vol. 77(3), pages 388-401, June.
    8. Granitz, Elizabeth & Klein, Benjamin, 1996. "Monopolization by "Raising Rivals' Costs": The Standard Oil Case," Journal of Law and Economics, University of Chicago Press, vol. 39(1), pages 1-47, April.
    9. Martin, Stephen & Normann, Hans-Theo & Snyder, Christopher M, 2001. "Vertical Foreclosure in Experimental Markets," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 466-496, Autumn.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Andre Jungmittag, 2018. "The Direct and Indirect Effects of Product Market Regulations in the Retail Trade Sector," JRC Research Reports JRC112222, Joint Research Centre.
    2. SANIN, Maria Eugenia & ZANAJ, Skerdilajda, 2007. "Environmental innovation under Cournot competition," LIDAM Discussion Papers CORE 2007050, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    3. Éric Avenel & Clémence Christin, 2011. "Equilibrium strategic overbuying," Economics Working Paper Archive (University of Rennes & University of Caen) 201205, Center for Research in Economics and Management (CREM), University of Rennes, University of Caen and CNRS.
    4. Olivier Chatain, 2014. "How do strategic factor markets respond to rivalry in the product market?," Strategic Management Journal, Wiley Blackwell, vol. 35(13), pages 1952-1971, December.
    5. repec:lic:licosd:31112 is not listed on IDEAS

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    More about this item

    Keywords

    Entry deterrence; Foreclosure; Overinvestment; Bilateral monopoly;
    All these keywords.

    JEL classification:

    • D20 - Microeconomics - - Production and Organizations - - - General
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts

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