Distribution Channels and Collusion of Manufacturers: Common versus Independent Retailers

Résumé

This paper analyzes manufacturers incentives to sustain tacit collusion when they distribute through a common retailer as compared to distribution through independent supply chains. We consider the two scenarios with wholesale contracts being either secret or observable to the competing supply chain. We show that distribution through independent supply chains facilitates collusion, compared to distribution through a common retailer, regardless of wholesale contracts being observable or not. Therefore, independent retailing is the more suitable organizational form to cooperate. We then compare public with secret wholesale contracts. We found that, contrary to results from static models, collusion is easier to sustain with secret contracts if competition is fierce. This occurs because deviation incentives with public contracts strongly increase with competition relative to the ones with private contracts. Our results hold both with two-part tariffs and linear wholesale price contracts."