Journal of Regulatory Economics

, Volume 31, Issue 3, pp 235–260 | Cite as

Incentives for sabotage in vertically related industries

  • David M. Mandy
  • David E. M. Sappington
Original Article


We show that the incentives of a vertically integrated supplier to “sabotage” the activities of downstream rivals can vary with both the type of sabotage and the nature of downstream competition. Cost-increasing sabotage is typically profitable under both Cournot and Bertrand competition. In contrast, demand-reducing sabotage is often profitable under Cournot competition, but unprofitable under Bertrand competition. Incentives for sabotage can vary non-monotonically with the degree of product differentiation.


Regulation Sabotage Vertically integrated industries 

JEL Classifications

L51 L10 L22 


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Copyright information

© Springer Science+Business Media, LLC 2007

Authors and Affiliations

  1. 1.Department of EconomicsUniversity of MissouriColumbiaUSA
  2. 2.Department of EconomicsUniversity of FloridaGainesvilleUSA

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