Manufacturer collusion: Strategic implications of the channel structure

Arbeitspapier

We investigate how the structure of the distribution channel affects tacit collusion between manufacturers. When selling through a common retailer, we find - in contrast to the conventional understanding of tacit collusion that firms act to maximize industry profits - that colluding manufacturers strategically induce double marginalization so that retail prices are above the monopoly level. This lowers industry profits but increases the profit share that manufacturers appropriate from the retailer. Comparing common distribution with independent (exclusive) distribution, we show that the latter facilitates collusion. Despite this result, common retailing leads to lower welfare because a common retailer monopolizes the downstream market. For the case of independent retailing, we also demonstrate that contract offers that are observable to the rival retailer are not necessarily beneficial for collusive purposes.

Object Details

• ISBN: 978-3-86304-260-8
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: DICE Discussion Paper ; No. 261

Classification and Topics

• Classification: Wirtschaft
• Subject: tacit collusion ; contract observability ; common retailing ; independent (exclusive) retailing ; two-part tariffs ; wholesale price contracts

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Reisinger, Markus ; Thomes, Tim Paul
• Event: Veröffentlichung
• (who): Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE)
• (where): Düsseldorf
• (when): 2017

Further information

• Handle: http://hdl.handle.net/10419/162839
• Last update: 10.03.2025, 11:43 AM CET