This paper analyzes a supplier's incentives to foreclose downstream entry when entrants have stronger positions in different market segments, thus bringing added value as well as competition. We first consider the case where wholesale contracts take the form of linear tariffs, and characterize the conditions under which the competition-intensifying effect dominates, thereby leading to foreclosure. We then show that foreclosure can still occur with non-linear tariffs, even coupled with additional provisions such as resale price maintenance.
Foreclosure; Vertical Contracting; Customer Segments; Downstream Competition;
- D43: Oligopoly and Other Forms of Market Imperfection
- K21: Antitrust Law
- L12: Monopoly • Monopolization Strategies
- L42: Vertical Restraints • Resale Price Maintenance • Quantity Discounts
Bruno Jullien, Markus Reisinger, and Patrick Rey, “Vertical Foreclosure and Multi-Segment Competition”, TSE Working Paper, n. 17-876, December 15, 2017.
Bruno Jullien, Markus Reisinger, and Patrick Rey, “Vertical Foreclosure and Multi-Segment Competition”, Economics Letters, vol. 169, August 2018, pp. 31–34.