The foreclosure of downstream firms is a major feature in the study of the strategic aspects of vertical integration. The main issue is that, however profitable it may seem for integrated firms to adopt this rising rivals’ costs strategy, foreclosure fails to appear in most models, unless integrated firms are assumed to be able to commit on this strategy. We propose a model based on the idea that foreclosure results from a technological choice. This approach allows us to find equilibrium vertical foreclosure without supposing any commitment capability to integrated firms. Foreclosure results from the adoption a technology that doesn’t rely on the (standard) intermediate good traded on the market, but on a different good, not compatible with the standard technology. The possibility of a (costly) adaptation of a nonstandard good to the standard technology is explicitly taken into account in the model.
