Passive forward ownership and upstream collusion

We examine the effects of passive forward ownership on the sustainability of upstream collusion. We consider a homogeneous Cournot duopoly with competing vertical chains. In one chain, the upstream firm has non-controlling partial ownership over its downstream exclusive client. We find that passive forward ownership hinders upstream collusion; the higher is the degree of ownership, the more difficult it is for upstream collusion to be sustained. The driving force behind our result is that a higher degree of passive forward ownership decreases collusive profits of the unintegrated upstream firm.

Keywords: Tacit collusion, Passive forward ownership, Vertical chains, Cournot competition

JEL Classification: D43, L13, L40, L81

Suggested Citation: Suggested Citation

Charistos, Konstantinos and Pinopoulos, Ioannis and Skartados, Panagiotis, Passive forward ownership and upstream collusion (September 15, 2021). Available at SSRN: https://ssrn.com/abstract=3924078 or http://dx.doi.org/10.2139/ssrn.3924078