Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/225231
Authors: 
Shekhar, Shiva
Thomes, Tim Paul
Year of Publication: 
2020
Series/Report no.: 
DICE Discussion Paper No. 351
Abstract: 
We investigate the effects of passive backward acquisitions in their efficient upstream supplier on downstream firms' ability to collude in a dynamic game of price competition with homogeneous goods. We find that passive backward acquisitions impede downstream collusion. The main driver of our finding is that a passive backward acquisition secures an acquirer from zero continuation profits after a breakdown of collusion. This anti-collusive effect cannot be outweighed by a lower collusive price that is set by the cartel to increase the acquirer's profit from its claim on the upstream margin.
Subjects: 
Tacit collusion
passive backward acquisitions
Bertrand competition
JEL: 
D43
L13
L40
L81
ISBN: 
978-3-86304-350-6
Document Type: 
Working Paper

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