We investigate the possibility for two vertically related firms to at least partially collude on the wholesale price over an infinite horizon to mitigate or eliminate the effects of double marginalisation, thereby avoiding contracts which might not be enforceable. We characterise alternative scenarios envisaging different deviations by the upstream firm and different punishments. This allows us to show that the most efficient case is that in which the upstream firm deviates along its best reply function and the punishment prescribes the disruption of the vertical relation for good after a deviation from the collusive path.

Stefano Bolatto, Luca Lambertini (2017). Collusive vertical relations. Bologna : Dipartimento di Sicenze Economiche - Alma Mater Studiorum Università di Bologna [10.6092/unibo/amsacta/5615].

Collusive vertical relations

Stefano Bolatto;Luca Lambertini
2017

Abstract

We investigate the possibility for two vertically related firms to at least partially collude on the wholesale price over an infinite horizon to mitigate or eliminate the effects of double marginalisation, thereby avoiding contracts which might not be enforceable. We characterise alternative scenarios envisaging different deviations by the upstream firm and different punishments. This allows us to show that the most efficient case is that in which the upstream firm deviates along its best reply function and the punishment prescribes the disruption of the vertical relation for good after a deviation from the collusive path.
2017
16
Stefano Bolatto, Luca Lambertini (2017). Collusive vertical relations. Bologna : Dipartimento di Sicenze Economiche - Alma Mater Studiorum Università di Bologna [10.6092/unibo/amsacta/5615].
Stefano Bolatto; Luca Lambertini
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11585/929476
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