Vertically integrated firms supply upstream goods to their own downstream units (self-supply). At the same time non-integrated upstream firms may supply the upstream good to independent down-stream firms (third party sales). Should only third party sales constitute the market when calculating market share thresholds in State aid control, or should self-supply also be considered? This note shows that the presence of self-supply may significantly reduce the downward pressure on prices that can result from a State aid-induced output expansion. If so, self-supply should be considered in market definition.
Keywords: market share, self supply