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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)

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.

Suggested Citation

  • Bouras Brahim, 2007. "Market and Welfare Effects of Collusion with Reference to Multi-Product Food Oligopoly and Oligopsony," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 5(1), pages 1-16, May.
  • Handle: RePEc:bpj:bjafio:v:5:y:2007:i:1:n:5
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