In a dynamic game of competing supply chains where the bargaining power is on the retailers' ’side and wholesale contracts are observable, I show that inefficient contracting emerges as a mechanism to implement collusion among retailers. When full collusion is not sustainable with efficient contracts, N retailers competing à la Bertrand on the fi…nal market might rely on wholesale contracts entailing positive wholesale prices and negative franchise fees to squeeze the wedge between collusive and deviation profi…ts. The paper also offers insights about the role of communication on the equilibrium outcomes of games where retailers have the initiative. It turns out that communication is fundamental to sustain downstream collusion, although it may generate efficiency losses - — i.e., profi…ts lower than the monopoly level.

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