RT Journal Article
SR 00
ID 10.1016/j.infoecopol.2022.100981
A1 Bisceglia, Michele
A1 Padilla, Jorge
A1 Piccolo, Salvatore
A1 Shekhar, Shiva
T1 Vertical integration, innovation and foreclosure with competing ecosystems
JF Information Economics and Policy
YR 2022
FD 2022-09
VO vol.60
K1 Competing ecosystems
K1 Foreclosure
K1 Innovation
K1 Vertical mergers
AB We study the competitive effects of a vertical merger in a digital industry where an integrated incumbent (closed ecosystem) competes with an open ecosystem formed by an upstream supplier (ecosystem gatekeeper) and two downstream retailers selling differentiated products. Absent innovation, the incumbent sells a superior product compared to the rivals’ ones. Yet, the gatekeeper of the open ecosystem can fill up this gap by engaging in product innovation. We investigate the impact of vertical integration on the gatekeeper’s incentives to foreclose its non-integrated downstream unit and innovate its ecosystem to compete head-to-head with the incumbent. The vertically integrated gatekeeper raises the costs of the unintegrated competitor to relax intra-ecosystem competition but does not fully foreclose it as that would cause fiercer inter-ecosystem competition. Moreover, vertical integration enhances innovation within the open ecosystem, enabling its participants to catch up with the incumbent. Overall, vertical integration may benefit consumers even when it softens intra-ecosystem competition.
PB Elsevier
SN 0167-6245
LK https://publications.ut-capitole.fr/id/eprint/50387/
UL http://tse-fr.eu/pub/130288