Collusive Vertical Relations
Stefano Bolatto and
Luca Lambertini ()
Working Papers from Dipartimento Scienze Economiche, Universita' di Bologna
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.
JEL-codes: D43 L13 L42 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-com, nep-cta, nep-ind and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:bol:bodewp:wp1103
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