Year: 2015
Type: preprint
Abstract: We analyze the incentives to collude when brand manufacturers compete with a private label producer of inferior quality.Full collusion is easier to sustain than partial collusion from the brands'perspective when horizontal di¤erentiation is large and vertical di¤erentiation is small.The private label …rm is better o¤ under full collusion than under partial collusion if goods are su¢ ciently homogenous (horizontal and/or vertical).Partial collusion could be preferred by the private label exactly when full collusion is easier to sustain.Improving the private label's quality makes full collusion more likely, either because it relaxes the brand producers' incentive constraint or because it shifts the preference of the private label …rm from partial collusion to full collusion.Fully collusive behavior reveals itself through a nonnegative price e¤ect on the brands'side caused by a quality increase of the private label good.
Authors: Irina Hasnas, Christian Wey
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
Funder: Deutsche Forschungsgemeinschaft
OpenAlex ID: W1886447051