Relative-performance delegation destabilizes upstream collusion

Jen-Yao Lee, Leonard F. S. Wang and Ji Sun

MPRA Paper from University Library of Munich, Germany

Abstract: This paper analyzes upstream firms’ collusive sustainability when downstream firms adopt the relative-performance delegation in an infinitely repeated Cournot or Bertrand game. We find that relative-performance delegation makes managers act more aggressive and upstream collusion more difficult to sustain compared to sales-revenue delegation. The driving force is that downstream relative-performance delegation makes more profits for the deviated firm. This result holds regardless of the competition modes.

Keywords: Relative-performance delegation; upstream collusion; vertically related market; competition modes (search for similar items in EconPapers)
JEL-codes: D21 D43 L13 L21 (search for similar items in EconPapers)
Date: 2022-08-17, Revised 2022-10-12
New Economics Papers: this item is included in nep-bec, nep-com, nep-cta, nep-gth, nep-ind and nep-reg
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