Equilibrium Vertical Foreclosure
We formulate a complete, but analytically simple, equilibrium model of vertical mergers to evaluate the logic of standard vertical foreclosure claims and the criticisms made of those claims. The model includes incentives of the integrated firm and unintegrated input supplies to exclude rivals, the potential counter-strategies of competitors to these foreclosure threats, and the potential hold-out problem. In this fully specified model, vertical foreclosure can emerge in equilibrium.