IDEAS home Printed from https://ideas.repec.org/p/jku/econwp/2021-18.html
   My bibliography  Save this paper

Opportunism Problems of Colluding Manufacturers

Author

Listed:
  • Jana Gieselmann

    (HHU)

  • Matthias Hunold
  • Johannes Muthers
  • Alexander Rasch

Abstract

In a market with two exclusive manufacturer-retailer pairs, we show that colluding manufacturers may not be able to attain supra-competitive profits when contracts with retailers are secret. The stability of manufacturer collusion depends on the retailers’ beliefs. We consider various dynamic beliefs and find that industry-profit-maximizing collusion is feasible for some. Collusion is even renegotiation-proof under trigger beliefs if a novel condition of opportunism-proofness holds, which can be more demanding than the standard stability condition. Trigger beliefs are not flexible enough to allow for formation of collusion. We demonstrate that adaptive beliefs may be necessary for the formation of manufacturer collusion in a non-collusive industry.

Suggested Citation

  • Jana Gieselmann & Matthias Hunold & Johannes Muthers & Alexander Rasch, 2021. "Opportunism Problems of Colluding Manufacturers," Economics working papers 2021-18, Department of Economics, Johannes Kepler University Linz, Austria.
    • Handle: RePEc:jku:econwp:2021-18
    Note: English
    as

    Download full text from publisher

    File URL: http://www.econ.jku.at/papers/2021/wp2118.pdf
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    opportunism; credible punishment; cartel formation; manufacturer collusion; vertical relations; renegotiation-proof; secret contracting;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:jku:econwp:2021-18. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: René Böheim (email available below). General contact details of provider: https://edirc.repec.org/data/vlinzat.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.