Abstract
This article analyzes the incentives for a vertically‐integrated producer (VIP) to engage in “self‐sabotage”. Self‐sabotage occurs when a VIP intentionally increases its upstream costs of production. This article explains why self‐sabotage may be profitable for a VIP even though it raises symmetrically the cost of the upstream product to all downstream producers. Identifies conditions under which self‐sabotage enables a VIP to disadvantage downstream rivals differentially without violating parity requirements.
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