Friday, May 16, 2014
Daniel Garcia, University of Vienna examines Branding and Collusion in Vertically Differentiated Industries.
ABSTRACT: This paper presents a model of collusion in vertically differentiated industries where firms have the option to make their products distinguishable to consumers by attaching a brand. We show that if consumers’ preferences are linear in the quality dimension and their beliefs satisfy a standard refinement, collusion is facilitated in the absence of brands. More precisely, we show that if collusion is feasible with brands it is also feasible without them.