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Vertical integration with multiple (complementary) input suppliers: a theoretical approach
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Resumo(s)
Motivated by a recent acquisition in the live music events industry, this paper discusses the effects of and the incentives for vertical integration in the presence of multiple complementary inputs. Among other inputs, a live music events promoter needs access to a venue and a contract with an artist in order to produce a live show. Before the proposed acquisition, the venue, a monopolist arena, was already controlled by some promoters. After the operation, the promoter with control over the arena also has some control over a significant number of artists (indirectly, either through managers, through influence over agents or through the acquisition of tours). We show that when the arena is free to set prices, the vertically integrated firm has no incentive to limit competing promoters’ access to "its" artists: the arena price is a sufficient instrument to implement an input foreclosure strategy. However, if there are constraints with respect to the arena price, the vertically integrated firm may have the incentive to deny competing promoters access to artists, and this alternative input foreclosure strategy is detrimental for consumer welfare.
Descrição
Palavras-chave
Input foreclosure Vertical integration
Contexto Educativo
Citação
Editora
Springer