Economics of collective refusals to supply

This paper examines situations where vertically integrated firms refuse to supply an input to an independent competitor in the downstream market. The treatment of such cases by competition or regulatory authorities is based on the assumption that such outcomes can only arise if there is collusion in the upstream markets. We argue that this is not always the case. In particular, we argue that proper antitrust or regulatory assessment of such cases requires analysis of the nature of competition, the shape and elasticity of the demand curve, the observability of upstream contracts, and even the number of potential downstream competitors.