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Market and Welfare Effects of Collusion with Reference to Multi-Product Food Oligopoly and Oligopsony

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  • Bouras Brahim

    (University of Arkansas at Pine Bluff)

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    Abstract

    Among the dominant firms in the US meat and grain business, many produce several products, some of which are demand-related. Yet, virtually all research on collusion among those firms focuses on a single product. This paper uses a game-theoretic model to investigate the conditions under which multi-product food firms producing demand-related goods have incentives to collude, and examines the welfare implications of collusion for participants in a vertical marketing chain. I show that multi-product food firms have a greater incentive to collude when they become more efficient. In contrast to previous work, I find that the effect of the degree of product substitutability on collusion sustainability hinges on the cost effect arising from joint production. From a policy standpoint, I show that mergers between single-product firms producing demand-related goods under certain conditions may hinder collusion.

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    Bibliographic Info

    Article provided by De Gruyter in its journal Journal of Agricultural & Food Industrial Organization.

    Volume (Year): 5 (2007)
    Issue (Month): 1 (May)
    Pages: 1-16

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    Handle: RePEc:bpj:bjafio:v:5:y:2007:i:1:n:5

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    Web page: http://www.degruyter.com

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    Web: http://www.degruyter.com/view/j/jafio

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