Passive forward ownership and upstream collusion

Passive forward ownership and upstream collusion

We investigate the effects of passive forward ownership on the sustainability of upstream collusion. We consider a homogeneous Cournot duopoly with competing vertical chains, where each upstream firm has symmetric passive ownership over its downstream exclusive client. With general demand, (i) we sh...

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Published in:Economics letters Vol. 216; p. 110608
Main Authors: Charistos, Konstantinos, Pinopoulos, Ioannis N., Skartados, Panagiotis
Format: Journal Article
Language:English
Published: Elsevier B.V 01-07-2022
Subjects:
Competing vertical chains
Passive vertical ownership
Tacit collusion
Passive vertical ownership
D43
Tacit collusion
L81
L40
L13
Competing vertical chains
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Abstract We investigate the effects of passive forward ownership on the sustainability of upstream collusion. We consider a homogeneous Cournot duopoly with competing vertical chains, where each upstream firm has symmetric passive ownership over its downstream exclusive client. With general demand, (i) we show that passive forward ownership increases collusive profits, (ii) we identify two opposing effects of passive forward ownership on punishment and deviating profits: a positive (direct) effect due to ownership and a negative effect working through input prices. By considering three demand functions, including the widely-used linear demand, we show that passive forward ownership hinders upstream collusion. •We consider two competing vertical chains (CVCs) with a homogeneous Cournot duopoly.•In each CVC there exists a symmetric passive partial forward ownership (PFO).•We set an infinitely repeated two-stage game with general demand and linear tariffs.•Under a general demand, we identify the effects that may hinder upstream collusion.•Under three demand examples (including linear), PFO does hinder upstream collusion.
AbstractList We investigate the effects of passive forward ownership on the sustainability of upstream collusion. We consider a homogeneous Cournot duopoly with competing vertical chains, where each upstream firm has symmetric passive ownership over its downstream exclusive client. With general demand, (i) we show that passive forward ownership increases collusive profits, (ii) we identify two opposing effects of passive forward ownership on punishment and deviating profits: a positive (direct) effect due to ownership and a negative effect working through input prices. By considering three demand functions, including the widely-used linear demand, we show that passive forward ownership hinders upstream collusion. •We consider two competing vertical chains (CVCs) with a homogeneous Cournot duopoly.•In each CVC there exists a symmetric passive partial forward ownership (PFO).•We set an infinitely repeated two-stage game with general demand and linear tariffs.•Under a general demand, we identify the effects that may hinder upstream collusion.•Under three demand examples (including linear), PFO does hinder upstream collusion.
ArticleNumber 110608
Author Pinopoulos, Ioannis N.
Charistos, Konstantinos
Skartados, Panagiotis
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  organization: Department of Economics, Athens University of Economics and Business, Athens, Greece
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10.1111/j.1756-2171.2012.00183.x
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10.1016/j.euroecorev.2016.07.006
10.1016/j.euroecorev.2008.09.003
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Keywords Passive vertical ownership
D43
Tacit collusion
L81
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Competing vertical chains
Language English
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SubjectTerms Competing vertical chains
Passive vertical ownership
Tacit collusion
Title Passive forward ownership and upstream collusion
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