Chapter 33 A Primer on Foreclosure

Patrick Rey*, Jean Tirole

*Corresponding author for this work

    Research output: Chapter in Book/Report/Conference proceedingChapter

    166 Scopus citations

    Abstract

    This chapter analyzes the private rationale and the social costs and benefits of market foreclosure, here defined as a firm's restriction of output in one market through the use of market power in another market. The chapter first focuses on vertical foreclosure (in which full access to a bottleneck input is denied to competitors) and provides an overview of the theory of access to an essential facility in an unregulated environment. It considers a wide array of contexts: possibility of bypass of the bottleneck facility, upstream vs downstream location of this facility, and various exclusionary activities such as vertical integration and exclusive dealing. It identifies a number of robust conclusions as to the social and private costs and benefits of foreclosure. The chapter then turns to horizontal foreclosure, where the monopoly good is sold directly to the end-users, and analyzes recent theories of anti-competitive bundling aimed at reducing competition in the adjacent markets or at protecting the monopoly market. Finally, the chapter tackles exclusive customer contracts and discusses potential efficiency defenses for exclusionary behavior.

    Original languageEnglish (US)
    Title of host publicationHandbook of Industrial Organization
    EditorsM. Armstrong, R. Porter
    Pages2145-2220
    Number of pages76
    DOIs
    StatePublished - 2007

    Publication series

    NameHandbook of Industrial Organization
    Volume3
    ISSN (Print)1573-448X

    Keywords

    • Antitrust
    • Essential facility
    • Foreclosure
    • Tie-ins
    • Vertical integration

    ASJC Scopus subject areas

    • Industrial relations
    • Finance
    • Economics and Econometrics
    • Strategy and Management

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