Collusion and downstream entry in a vertically integrated industry
AbstractWe analyse the impact of an entry threat at the downstream level on the ability of a pair of vertically integrated incumbents to collude. We present an original model of horizontal product differentiation on the final market and characterize the structures of this market for which an entry threat facilitates collusion between incumbents. While the entry threat leaves collusion and deviation profits unchanged, it lowers profits in punishment periods. Consequently, an entry threat discourages deviations and facilitates collusion, thus benefiting incumbents.
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Bibliographic InfoPaper provided by Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS in its series Economics Working Paper Archive (University of Rennes 1 & University of Caen) with number 201208.
Date of creation: Jan 2012
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Find related papers by JEL classification:
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
- L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-02-20 (All new papers)
- NEP-BEC-2012-02-20 (Business Economics)
- NEP-COM-2012-02-20 (Industrial Competition)
- NEP-MIC-2012-02-20 (Microeconomics)
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