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Consumer Dynamics and Vertical Relations: Coordination and Foreclosure in a U.S. Consumer-Goods Industry (Job Market Paper)

(Available on November 17, 2025, following the data provider’s NDA policy)  

Abstract 

Vertical integration is usually studied in a static context, yet intertemporal linkages can reshape its effects by affecting investment incentives, consumer lock-in, or innovation. This paper develops a dynamic model to evaluate how intertemporal linkages alter the effects of vertical mergers. I estimate the model using data from a consumer-goods industry in the US, where brand loyalty induces strong demand dynamics. To solve the high-dimensional dynamic game, I adapt existing reinforcement learning methods to approximate Markov perfect equilibria. The findings reveal that intertemporal linkages magnify the consequences of any competitive disadvantage. This prompts firms to moderate their margins to alleviate coordination problems within vertical structures, but it can also strengthen their incentives to disadvantage rivals. Together, these forces produce a perverse outcome: as intertemporal linkages strengthen, efficiency gains from integration shrink, and integrated downstream firms reduce prices of integrated products less, while foreclosing non-integrated products more severely. 

Vertical Foreclosure: A Dynamic Perspective

Abstract 

This paper shows that intertemporal linkages can affect the capability and incentives to vertically foreclose rivals. Intertemporal linkages introduce two opposing effects. First, they magnify the impact of cost asymmetries (direct effect), potentially enhancing foreclosure concerns. Second, they discipline alternative suppliers (indirect effect), potentially reducing the scope for foreclosure. The overall impact depends on the feasibility of a counter-merger and the strength of the intertemporal linkages. When a counter-merger is not possible or the intertemporal linkages are weak, the scope for foreclosure increases. Conversely, when a counter-merger is feasible and the intertemporal linkages are strong, the scope for foreclosure diminishes or disappears entirely.

Work in Progress

Endogenous Vertical Networks (with Ali Yurukoglu)

Platform Annexation (with Patrick Rey)