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


Shekhar, Shiva; Thomes, Tim Paul


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.


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