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- Title
REGULATION, VERTICAL INTEGRATION AND SABOTAGE.
- Authors
Beard, T. Randolph; Kaserman, David L.; Mayo, John W.
- Abstract
We consider the incentive of a dominant firm that supplies a necessary input to a Bertrand-competitive differentiated products downstream industry to: (1) vertically integrate forward, and (2) raise its downstream rivals’ costs through non-price activities which we characterize generally as ‘sabotage’. We examine these incentives both in the absence and presence of a regulatory constraint on the upstream price. We find that, while an incentive for vertical integration is present regardless of the existence of the regulatory constraint, the incentive for sabotage emerges only in the presence of binding input price regulation. Welfare effects are also explored.
- Subjects
VERTICAL integration; COMPETITION; PRICE regulation; ECONOMIC stabilization; PRICE discrimination; HORIZONTAL integration; INDUSTRIAL concentration; ECONOMIC policy
- Publication
Journal of Industrial Economics, 2001, Vol 49, Issue 3, p319
- ISSN
0022-1821
- Publication type
Article
- DOI
10.1111/1467-6451.00152