Vertical Collusion

46 Pages Posted: 27 Oct 2015 Last revised: 3 Mar 2017

See all articles by David Gilo

David Gilo

Tel Aviv University - Buchmann Faculty of Law

Yaron Yehezkel

Coller School of Management , Tel-Aviv University

Multiple version iconThere are 2 versions of this paper

Date Written: February 28, 2017

Abstract

We characterize the features of collusion involving retailers and their supplier, who engage in secret vertical contracts and all equally care about future profits (“vertical collusion”). We show such collusion is easier to sustain than collusion among retailers. The supplier pays retailers slotting allowances as a prize for adhering to the collusive scheme. In the presence of competing suppliers, vertical collusion can be sustained using short – term exclusive dealing in every period with the same supplier, if the supplier can inform a retailer that the other retailer did not offer the supplier exclusivity.

Keywords: vertical relations, tacit collusion, exclusive dealing, opportunism, slotting allowances

JEL Classification: L41, L42, K21, D84

Suggested Citation

Gilo, David and Yehezkel, Yaron, Vertical Collusion (February 28, 2017). Available at SSRN: https://ssrn.com/abstract=2680349 or http://dx.doi.org/10.2139/ssrn.2680349

David Gilo (Contact Author)

Tel Aviv University - Buchmann Faculty of Law ( email )

Ramat Aviv
Tel Aviv 69978, IL
Israel
+972-3-6406299 (Phone)

Yaron Yehezkel

Coller School of Management , Tel-Aviv University ( email )

Ramat Aviv
Tel Aviv, 69978
Israel

HOME PAGE: http://www.tau.ac.il/~yehezkel/

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