Work

Foreclosure and Profit Shifting With Partial Vertical Ownership

Year: 2024

Type: article

Abstract: ABSTRACT We demonstrate that the incentives of firms that partially own their suppliers or customers to foreclose rivals depend on how the partial owner can extract profit from the target. Compared to a fully vertically integrated firm, a partial owner may obtain only a share of the target's profit but may have significant influence over the target's strategy. We show that the incentives for customer and input foreclosure can be higher, equal, or even lower with partial ownership than with a vertical merger, depending on how the protection of minority shareholders and transfer price regulations affect the scope for profit extraction.

Source: Journal of Economics & Management Strategy

DOI: 10.1111/jems.12621

Authors: Matthias Hunold, Vasilisa Werner

Institutions: University of Siegen, University of Potsdam

Language: English

Topic: Merger and Competition Analysis

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Peace, justice, and strong institutions

Open Access status: hybrid

Estimated APC paid: $3,090