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Title Vertical Integration and Market Foreclosure: Empirical Evidence from the Korean Movie Industry
Author Yun Jeong Choi (Yonsei University), Jong-Hee Hahn (Yonsei University) and Hojung Kim (Korea Information Society Development Institute)
Volume 35 Number 2
Pages 417-438 
Keywords Vertical Integration, Foreclosure, Market Structure, Movie Industry
Abstract We examine how the foreclosure incentive of firms is affected by the degree of vertical
integration in related markets, which is measured by the number of vertically integrated
firms. We specifically investigate how the exhibition behavior of the vertically integrated
and separated theaters in the Korean movie industry responds to a change in the degree of
vertical integration by using daily screening data over a 7-year period. The vertical
separation of a previously integrated firm serves as a structural break. Our results show that
the foreclosure incentive of the vertically integrated firms generally weakens as the degree of
vertical integration decreases. However, the existing integrated firms strengthen their
intensity of foreclosure toward the newly separated firm after the breakup, perhaps to
weaken the market position of the previously integrated rival. Moreover, we find that the
newly separated firm behaves similarly to other independent firms, with no sign of
foreclosure behavior.
File KER-20190701-35-2-06.pdf
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