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

Bouras Brahim
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Bouras Brahim: University of Arkansas at Pine Bluff

Journal of Agricultural & Food Industrial Organization, 2007, vol. 5, issue 1, 16

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.

Keywords: collusion; multi-product food firms; demand-relatedness; welfare (search for similar items in EconPapers)
Date: 2007
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DOI: 10.2202/1542-0485.1163

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