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Upstream collusion and downstream managerial incentives

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  • Bian, Junsong
  • Lai, Kin Keung
  • Hua, Zhongsheng

Abstract

We investigate the effects of downstream firms’ managerial incentives on upstream collusion. Downstream profit-and-revenue incentive schemes make upstream manufacturers easier to collude than a pure-profit incentive scheme does when retailers compete in prices. However, the opposite occurs under quantity competition.

Suggested Citation

  • Bian, Junsong & Lai, Kin Keung & Hua, Zhongsheng, 2013. "Upstream collusion and downstream managerial incentives," Economics Letters, Elsevier, vol. 118(1), pages 97-100.
    • Handle: RePEc:eee:ecolet:v:118:y:2013:i:1:p:97-100
    DOI: 10.1016/j.econlet.2012.09.034
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    References listed on IDEAS

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    1. Normann, Hans-Theo, 2009. "Vertical integration, raising rivals' costs and upstream collusion," European Economic Review, Elsevier, vol. 53(4), pages 461-480, May.
    2. Volker Nocke & Lucy White, 2007. "Do Vertical Mergers Facilitate Upstream Collusion?," American Economic Review, American Economic Association, vol. 97(4), pages 1321-1339, September.
    3. Salvatore Piccolo & Markus Reisinger, 2011. "Exclusive Territories and Manufacturers' Collusion," Management Science, INFORMS, vol. 57(7), pages 1250-1266, July.
    4. Mujumdar, Sudesh & Pal, Debashis, 2007. "Strategic managerial incentives in a two-period Cournot duopoly," Games and Economic Behavior, Elsevier, vol. 58(2), pages 338-353, February.
    5. Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter.
    6. Spagnolo, Giancarlo, 2005. "Managerial incentives and collusive behavior," European Economic Review, Elsevier, vol. 49(6), pages 1501-1523, August.
    7. Lambertini, Luca & Trombetta, Marco, 2002. "Delegation and firms' ability to collude," Journal of Economic Behavior & Organization, Elsevier, vol. 47(4), pages 359-373, April.
    8. Fershtman, Chaim, 1985. "Managerial incentives as a strategic variable in duopolistic environment," International Journal of Industrial Organization, Elsevier, vol. 3(2), pages 245-253, June.
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    Citations

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    Cited by:

    1. Lee, Jen-Yao & Wang, Leonard F. S. & Sun, Ji, 2022. "Relative-performance delegation destabilizes upstream collusion," MPRA Paper 114939, University Library of Munich, Germany, revised 12 Oct 2022.
    2. Bian, Junsong & Zhao, Xuan & Liu, Yunchuan, 2020. "Single vs. cross distribution channels with manufacturers’ dynamic tacit collusion," International Journal of Production Economics, Elsevier, vol. 220(C).
    3. Jen-Yao Lee & Chen-Chia Fan & Chien-Shu Tsai, 2023. "Network Externalities and Downstream Collusion under Asymmetric Costs: A Note," Games, MDPI, vol. 14(2), pages 1-11, March.
    4. Bian, Junsong & Lai, Kin Keung & Hua, Zhongsheng & Zhao, Xuan & Zhou, Guanghui, 2018. "Bertrand vs. Cournot competition in distribution channels with upstream collusion," International Journal of Production Economics, Elsevier, vol. 204(C), pages 278-289.
    5. Leonard F. S. Wang & Han Wang, 2021. "Will managerial delegation impede upstream collusion?," Journal of Economics, Springer, vol. 134(2), pages 127-146, October.
    6. Bin Ying & Leonard F. S. Wang & Qidi Zhang, 2023. "Upstream collusion and corporate social responsibility in downstream competition," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(2), pages 1020-1028, March.

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    More about this item

    Keywords

    Collusion; Incentive; Vertical channel; Price and quantity competition;
    All these keywords.

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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