Vertical Integration as a Source of Hold-up: an Experiment

Présentation de Marie-Laure Allain (CNRS, CREST, Ecole Polytechnique)

Marie-Laure Allain (CNRS, CREST, Ecole Polytechnique) En collaboration avec Claire Chambolle, Patrick Rey et Sabrina Teyssier.

Résumé : In a vertical chain in which two rivals must invest before contracting with one of two competing suppliers, partial vertical integration may create hold-up for the rival to the benefit of the integrated firm. This article develops an experiment to test this theoretical result in two different setups. In a Commitment setup, suppliers can pre-commit ex ante to appropriating part of the joint profit. In a Sabotage setup, suppliers can degrade \textit{ex post} the quality of the support they provide to their customers, hence reducing the customer's profit. Theory predicts that vertical integration creates hold-up in these two situations and we show that experimental evidence confirms theory. However, our experiment shows that the hold-up effect is significantly more pronounced in the Commitment than in the Sabotage setup which departs from theory. A potential explanation is that the independent firms face strategic uncertainty in the Sabotage but not in the Commitment setup.