Antitrust & Competition Policy Blog

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

Wednesday, January 20, 2021

Passive backward acquisitions and downstream collusion

Passive backward acquisitions and downstream collusion

By:

Shekhar, Shiva; Thomes, Tim Paul

Abstract:

We investigate the effects of passive backward acquisitions in their efficient upstream supplier on downstream firms' ability to collude in a dynamic game of price competition with homogeneous goods. We find that passive backward acquisitions impede downstream collusion. The main driver of our finding is that a passive backward acquisition secures an acquirer from zero continuation profits after a breakdown of collusion. This anti-collusive effect cannot be outweighed by a lower collusive price that is set by the cartel to increase the acquirer's profit from its claim on the upstream margin.

URL:

http://d.repec.org/n?u=RePEc:zbw:dicedp:351&r=com

https://lawprofessors.typepad.com/antitrustprof_blog/2021/01/passive-backward-acquisitions-and-downstream-collusion.html

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