Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Monday, October 9, 2017

Collusive Vertical Relations

S. Bolatto and L. Lambertini have written on Collusive Vertical Relations.

ABSTRACT: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.

http://lawprofessors.typepad.com/antitrustprof_blog/2017/10/collusive-vertical-relations.html

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