Do Agency Contracts Facilitate Upstream Collusion?

37 Pages Posted: 21 May 2018 Last revised: 10 Feb 2019

See all articles by Yoshifumi Hino

Yoshifumi Hino

Vietnam National University (VNU) - Business Administration Department

Susumu Sato

University of Tokyo - Graduate School of Economics

Yusuke Zennyo

Graduate School of Business Administration, Kobe University

Date Written: February 8, 2019

Abstract

This paper presents a study of whether agency contracts facilitate collusion among upstream manufacturers, as compared to traditional wholesale contracts. We consider an infinitely repeated game with a monopoly platform and multiple manufacturers. Our analysis shows that the critical discount factor, above which the upstream collusion can be sustainable by Nash-reversion trigger strategies, is the same under wholesale and agency contracts. That result indicates that the agency contract is not necessarily anticompetitive. By contrast, in an extended model with competing platforms, we show that the agency contract facilitates upstream collusion because accepting it under the agency contract mitigates platform competition.

Keywords: upstream collusion, cartel, stability, agency contract, wholesale contract

JEL Classification: L13, L42, L81, D21, D43, D86, K21

Suggested Citation

Hino, Yoshifumi and Sato, Susumu and Zennyo, Yusuke, Do Agency Contracts Facilitate Upstream Collusion? (February 8, 2019). Available at SSRN: https://ssrn.com/abstract=3174264 or http://dx.doi.org/10.2139/ssrn.3174264

Yoshifumi Hino

Vietnam National University (VNU) - Business Administration Department ( email )

Vietnam

Susumu Sato

University of Tokyo - Graduate School of Economics ( email )

Tokyo
Japan

Yusuke Zennyo (Contact Author)

Graduate School of Business Administration, Kobe University ( email )

2-1 Rokkodai
Nada
Kobe, Hyogo 657-8501
Japan

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