Passive Forward Ownership and Upstream Collusion

Passive Forward Ownership and Upstream Collusion

Ioannis Pinopoulos

National and Kapodistrian University of Athens - Department of Economics

Konstantinos Charistos

University of Macedonia - Department of Economics

Panagiotis Skartados

Athens University of Economics and Business - Department of Economics

 

Abstract

We examine the effects of passive forward ownership on the sustainability of upstream collusion. We consider a homogeneous Cournot duopoly with competing vertical chains. In one vertical chain, the upstream firm has passive ownership over its downstream client. We find that passive forward ownership hinders upstream collusion. We identify as the main driver of our finding the negative effect that passive forward ownership has on the upstream non‐owner’s collusive profits.