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Heinrich-Heine-Universität Düsseldorf >
Düsseldorf Institute for Competition Economics (DICE), University of Düsseldorf >
DICE Discussion Paper, Düsseldorf Institute for Competition Economics (DICE) >
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http://hdl.handle.net/10419/41417
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| Title: | | Vertical mergers, foreclosure and raising rivals' costs: Experimental evidence  |
| Authors: | | Normann, Hans-Theo |
| Issue Date: | | 2010 |
| Series/Report no.: | | DICE discussion paper 05 |
| Abstract: | | The hypothesis that vertically integrated firms have an incentive to foreclose the input market because foreclosure raises its downstream rivals' costs is the subject of much controversy in the theoretical industrial organization literature. A powerful argument against this hypothesis is that, absent commitment, such foreclosure cannot occur in Nash equilibrium. The laboratory data reported in this paper provide experimental evidence in favor of the hypothesis. Markets with a vertically integrated firm are signifiantly less competitive than those where firms are separate. While the experimental results violate the standard equilibrium notion, they are consistent with the quantalresponse generalization of Nash equilibrium. |
| Subjects: | | experimental economics foreclosure quantal response equilibrium raising rival's costs vertical integration |
| JEL: | | C72 C90 D43 |
| ISBN: | | 978-3-86304-004-8 |
| Document Type: | | Working Paper |
| Appears in Collections: | | DICE Discussion Paper, Düsseldorf Institute for Competition Economics (DICE)
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