Vertical collusion

Research output: Contribution to journalArticlepeer-review

Abstract

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
Volume51
Issue number1
DOIs
StatePublished - 1 Mar 2020

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