Cross-Market Integration and Sabotage
نویسندگان
چکیده
Recent industry developments motivate the study of cross-market firm integrations, which often raises controversies and regulatory concerns due to the potential negative effects through the integrated firms’ sabotage activities. In this paper, we analyze integrations of firms in two interrelated markets that produce complementary products. Two firms compete with differentiated products in each market. A unique phenomenon arises in this setting as the integrated firm could engage in bilateral sabotage, i.e., sabotage its rival in both markets. Interestingly, we find that the integrated firm does not always engage in bilateral sabotage. Depending on market conditions, it may engage in unilateral sabotage or no sabotage at all. Our findings provide important managerial and policy implications.
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