Vertical collusion

David Gilo*, Yaron Yehezkel

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review


We characterize collusion involving secret vertical contracts between retailers and their supplier—who are all equally patient (“vertical collusion”). We show such collusion is easier to sustain than collusion among retailers. Furthermore, vertical collusion can solve the supplier's inability to commit to charging the monopoly wholesale price when retailers are differentiated. The supplier pays retailers slotting allowances as a prize for adhering to the collusive scheme and rejects contract deviations. In the presence of competing suppliers, vertical collusion can be sustained using short-term exclusive dealing.

Original languageEnglish
Pages (from-to)133-157
Number of pages25
JournalRAND Journal of Economics
Issue number1
StatePublished - 1 Mar 2020


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