Collusion with Spot-Price Contracting
With the Lunch Seminar series, the Department of Finance is bringing eminent and up-and-coming researchers from around the world to Luxembourg.
Abstract:
We investigate the competitive effects of spot-price contracting, in which a buyer and seller contract to transact at a future date at the price prevailing in that market at that future date (the “spot price”); such contracts are ubiquitous in the beef-processing industry, among others.
We show that spot-price contracting can facilitate collusion: When such contracts are available, firms can maintain monopsonistic prices at much lower market concentrations than under standard Bertrand competition, and some degree of non-competitive pricing can be maintained for any market concentration. Further, differentiation has an ambiguous effect collusion: High or low levels of differentiation are most conducive to monopsonistic pricing, while intermediate levels of differentiation lead to more competitive pricing.
About Prof. Richard Lowery:
Richard Lowery is a professor at the University of Texas. His research areas are theoretical corporate finance and financial intermediation and experimental economics.
Language: English
This is a free seminar. Registration is mandatory.
Cold lunches are provided to registered participants.
Supported by the Luxembourg National Research Fund (FNR) 17984041