Vertical integration boosts output and profits, reshaping industry dynamics.
The article explores how incomplete information affects the foreclosure doctrine in economics. When upstream firms keep their costs secret, high-cost firms may produce less than they could, while low-cost firms may produce more. This leads to a situation where all firms have a reason to integrate downstream, but it is only beneficial for high-cost firms. Integration for high-cost firms can result in higher output, profits, and consumer surplus.