Colluding through suppliers
AbstractIn a dynamic game between N retailers and a large number of suppliers, I show that inefficient contracting emerges as a mechanism to implement collusion among retailers, building on the natural âcomplementarityâ between retail and wholesale prices. When efficient collusion is not sustainable, this complementarity allows retailers to rely on inefficient input supply, entailing double marginalization and negative franchise fees, to squeeze the wedge between collusive and deviation profits. I also study the role of communication on the equilibrium outcomes of games where retailers have the initiative. It turns out that communication is indeed fundamental to strengthen cartels' sustainability, although generating efficiency losses.
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Bibliographic InfoArticle provided by RAND Corporation in its journal RAND Journal of Economics.
Volume (Year): 43 (2012)
Issue (Month): 3 (09)
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Other versions of this item:
- Salvatore Piccolo, 2009. "Colluding through Suppliers," CSEF Working Papers, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy 224, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 08 Apr 2010.
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
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- Chris Doyle & Martijn A. Han, 2012. "Cartelization Through Buyer Groups," SFB 649 Discussion Papers SFB649DP2012-059, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
- Salvatore Piccolo & Giancarlo Spagnolo, 2014. "Debt, Managers and Cartels," CSEF Working Papers, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy 365, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
- Chris Doyle & Martijn Han, 2014. "Cartelization Through Buyer Groups," Review of Industrial Organization, Springer, Springer, vol. 44(3), pages 255-275, May.
- Chrysovalantou Milliou & Apostolis Pavlou, 2014. "Foreign Direct Investment Modes and Local Backward Linkages," CESifo Working Paper Series 4623, CESifo Group Munich.
- Cheng-Feng Cheng, 2012. "Evaluate the Effectiveness of Manager Compensation," International Journal of Business and Economics, College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan, College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 11(1), pages 25-44, June.
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