- Cite this article as:
- Sappington, D.E.M. & Weisman, D.L. J Regul Econ (2005) 27: 155. doi:10.1007/s11149-004-5342-8
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We analyze the incentives of a vertically-integrated producer (VIP) to engage in “self-sabotage”.Self-sabotage occurs when a VIP intentionally increases its upstream costs and/or reduces the quality of its upstream product. We identify conditions under which self-sabotage is profitable for the VIP even though it raises symmetrically the cost of the upstream product to all downstream producers and/or reduces symmetrically the quality of all downstream products. Under specified conditions, self-sabotage can enable a VIP to disadvantage downstream rivals differentially without violating parity requirements.