Passive Forward Ownership and Upstream Collusion
9 Pages Posted: 22 Jan 2022
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 vertical chain, the upstream firm has passive ownership over its downstream client. We find that passive forward ownership hinders upstream collusion. We identify as the main driver of our finding the negative effect that passive forward ownership has on the upstream non‐owner’s collusive profits.
Keywords: tacit collusion, Passive vertical ownership, Competing vertical chains
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