Arbeitspapier

Reputation and foreclosure with vertical integration: Experimental evidence

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Building on the seminal paper of Ordover, Saloner and Salop (1990), I study the role of reputation building on foreclosure in laboratory experiments. In one-shot interactions, upstream firms can choose to build a reputation by revealing their price history to the current upstream competitor. In particular, integrated firms can establish a reputation to foreclose the input market.an outcome that would otherwise not be tenable due to a commitment problem. I get three main results: First, withdrawal from the input market is three times more common with reputation building of the integrated firm. Second, the anticompetitive effects are much stronger when the integrated firm builds a reputation. Third, integrated firms choose to build a reputation significantly more often than non-integrated firms. Markets with reputation building of the integrated firm are ten times more often monopolized than without.

ISBN
978-3-86304-231-8
Language
Englisch

Bibliographic citation
Series: DICE Discussion Paper ; No. 232

Classification
Wirtschaft
Vertical Restraints; Resale Price Maintenance; Quantity Discounts
Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection
Design of Experiments: General
Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
Noncooperative Games
Subject
vertical restraints
commitment
reputation
experiments

Event
Geistige Schöpfung
(who)
Möllers, Claudia
Event
Veröffentlichung
(who)
Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE)
(where)
Düsseldorf
(when)
2016

Handle
Last update
10.03.2025, 11:43 AM CET

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Object type

  • Arbeitspapier

Associated

  • Möllers, Claudia
  • Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE)

Time of origin

  • 2016

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