Do Agency Contracts Facilitate Upstream Collusion?

41 Pages Posted: 21 May 2018 Last revised: 14 Oct 2019

See all articles by Yoshifumi Hino

Yoshifumi Hino

Vietnam-Japan University

Susumu Sato

Institute of Economic Research, Hitotsubashi University

Yusuke Zennyo

Graduate School of Business Administration, Kobe University

Date Written: October 12, 2019

Abstract

We examine whether agency contracts, more than traditional wholesale contracts, facilitate collusion among upstream manufacturers. We develop an infinitely repeated game with a monopoly platform and multiple manufacturers, and show that the agency contract does not facilitate upstream collusion. By contrast, in an extended model with competing platforms, we obtain the opposite result that agency contracts facilitate upstream collusion. It is particularly interesting that competing platforms might have an incentive to foster the formation of upstream collusion under agency contracts because accepting the collusion can act as a coordination device for them to maintain their commission rate at a high level. These results hold numerous implications for several recent antitrust cases related to collusion and coordination in online platforms.

Keywords: agency contract, cartel stability, upstream collusion, wholesale contract

JEL Classification: L13, L42, L81, K21

Suggested Citation

Hino, Yoshifumi and Sato, Susumu and Zennyo, Yusuke, Do Agency Contracts Facilitate Upstream Collusion? (October 12, 2019). Available at SSRN: https://ssrn.com/abstract=3174264 or http://dx.doi.org/10.2139/ssrn.3174264

Yoshifumi Hino

Vietnam-Japan University ( email )

Vietnam

Susumu Sato

Institute of Economic Research, Hitotsubashi University ( email )

Tokyo
Japan

Yusuke Zennyo (Contact Author)

Graduate School of Business Administration, Kobe University ( email )

2-1 Rokkodai
Nada
Kobe, Hyogo 657-8501
Japan

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