Competition policy, parity regulation and self‐sabotage

Abstract

This article analyzes the incentives for a vertically‐integrated producer (VIP) to engage in “self‐sabotage”. Self‐sabotage occurs when a VIP intentionally increases its upstream costs of production. This article explains why self‐sabotage may be profitable for a VIP even though it raises symmetrically the cost of the upstream product to all downstream producers. Identifies conditions under which self‐sabotage enables a VIP to disadvantage downstream rivals differentially without violating parity requirements.

Citation

Sappington, D.E.M. and Weisman, D.L. (2004), "Competition policy, parity regulation and self‐sabotage", info, Vol. 6 No. 1, pp. 52-56. https://doi.org/10.1108/14636690410535926