Passive forward ownership and upstream collusion

Konstantinos Charistos, Ioannis Pinopoulos and Panagiotis Skartados

Economics Letters, 2022, vol. 216, issue C

Abstract: We investigate the effects of passive forward ownership on the sustainability of upstream collusion. We consider a homogeneous Cournot duopoly with competing vertical chains, where each upstream firm has symmetric passive ownership over its downstream exclusive client. With general demand, (i) we show that passive forward ownership increases collusive profits, (ii) we identify two opposing effects of passive forward ownership on punishment and deviating profits: a positive (direct) effect due to ownership and a negative effect working through input prices. By considering three demand functions, including the widely-used linear demand, we show that passive forward ownership hinders upstream collusion.

Keywords: Competing vertical chains; Passive vertical ownership; Tacit collusion (search for similar items in EconPapers)
JEL-codes: D43 L13 L40 L81 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:216:y:2022:i:c:s0165176522001847

DOI: 10.1016/j.econlet.2022.110608

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