We are grateful to Heski Bar-Isaac, Alberto Bennardo, Marcello D’Amato, Riccardo Martina, Michael Raith, Markus Reisinger, Patrick Rey, Greg Shaffer, Giancarlo Spagnolo, Marco Pagnozzi, and especially David Martimort (the Editor) for helpful comments and discussions. We also thank seminar participants at Cornell (Johnson School), Milano (Cattolica), Naples, Padua, Rochester (Simon School), Rome, Venice, and Zurich for comments and feedback. Salvatore gratefully acknowledges support from the Toulouse School of Economics. Any remaining errors are ours.
Colluding through suppliers
Version of Record online: 16 OCT 2012
© 2012, RAND.
The RAND Journal of Economics
Volume 43, Issue 3, pages 492–513, Fall 2012
How to Cite
Piccolo, S. and Miklós-Thal, J. (2012), Colluding through suppliers. The RAND Journal of Economics, 43: 492–513. doi: 10.1111/j.1756-2171.2012.00183.x
- Issue online: 16 OCT 2012
- Version of Record online: 16 OCT 2012
This article investigates downstream firms’ ability to collude in a repeated game of competition between supply chains. We show that downstream firms with buyer power can collude more easily in the output market if they also collude on their input supply contracts. More specifically, an implicit agreement on input supply contracts with above-cost wholesale prices and negative fixed fees (that is, slotting fees) facilitates collusion on downstream prices. Banning information exchange about wholesale prices decreases the scope for collusion. Moreover, high downstream prices are more difficult to sustain if upstream rather than downstream firms make contract offers.