On the pro-competitive effects of passive partial backward ownership
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We consider a vertically related market in which an upstream monopolist supplier trades, via interim observable two-part tariff contracts, with two differentiated goods' downstream Cournot competitors. We show that passive partial backward ownership (PPBO) may be pro-competitive and welfare enhancing. PPBO exacerbates the upstream's commitment problem and yields lower wholesale prices, and higher industry output, consumers surplus, and welfare than in the absence of PPBO.