Research

Working Paper

When Wholesalers Join the Cartel: Prices, Markups, and Rent Sharing

Abstract: This paper studies how wholesaler participation affects cartel outcomes. I extend a capacity-constrained cartel model to allow upstream wholesalers to join a downstream retail cartel, discriminate in wholesale prices, and bargaining over the division of monopoly rents. Vertical collusion becomes fully inclusive and implements the monopoly price, with negotiated wholesale prices embedding retailer-specific bargaining weights. Using a novel station-level panel from the Brazilian gasoline market and eight cartel cases, I show that vertical cartels raise retail prices and margins by roughly three times as horizontal cartels, while wholesale margins increase only modestly. The inferred bargaining weights indicate that wholesalers capture most monopoly rents, yet retailers gain disproportionately from vertical collusion. The results challenge the view that vertical coordination is typically benign for the consumers and show that vertical cartels can generate substantially greater consumer harm.

Latest Draft: [PDF]

Works in Progress

How the State Bids: Government Participation and Pricing in First-Price Procurement Auctions

Managing Long-Run Competition: Evidence from Sao Paulo Pharmaceutical Procurement

with Karam Kang and Anh H. Nguyen.