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Article
Colluding through Suppliers
Rand Journal of Economics (2012)
  • Salvatore Piccolo, Catholic University of Milan
  • Jeanine Miklos-Thal, University of Rochester
Abstract

This article investigates downstream firms' ability to collude in a repeated game of competition between supply chains. We show that downstream firms with buyer power can collude more easily in the output market if they also collude on their input supply contracts. More specifically, an implicit agreement on input supply contracts with above-cost wholesale prices and negative fixed fees (that is, slotting fees) facilitates collusion on downstream prices. Banning information exchange about wholesale prices decreases the scope for collusion. Moreover, high downstream prices are more difficult to sustain if upstream rather than downstream firms make contract offers.

Keywords
  • collusion,
  • vertical contracting,
  • slotting fees,
  • buyer power,
  • information exchange
Disciplines
Publication Date
2012
Citation Information
Salvatore Piccolo and Jeanine Miklos-Thal. "Colluding through Suppliers" Rand Journal of Economics Vol. forthcoming (2012)
Available at: http://works.bepress.com/jmiklosthal/12/