Passive forward ownership and upstream collusion

13 Pages Posted: 16 Sep 2021

See all articles by Konstantinos Charistos

Konstantinos Charistos

University of Macedonia - Department of Economics

Ioannis Pinopoulos

National and Kapodistrian University of Athens - Department of Economics

Panagiotis Skartados

Athens University of Economics and Business - Department of Economics

Date Written: September 15, 2021

Abstract

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

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

Konstantinos Charistos

University of Macedonia - Department of Economics ( email )

Thessaloniki, 54006
Greece

HOME PAGE: http://www.uom.gr

Ioannis Pinopoulos (Contact Author)

National and Kapodistrian University of Athens - Department of Economics ( email )

1, Sofokleous Str
Athens, GR- 10559
Greece

Panagiotis Skartados

Athens University of Economics and Business - Department of Economics ( email )

76 Patission Street
GR-10434 Athens
Greece

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