Using List Prices to Collude or to Compete?

Abstract

Collusion is deemed unlikely in wholesale markets where upstream suppliers and intermediate buyers privately negotiate discounts off list prices and sales quotas are unfeasible. However, many wholesale markets include both small and large buyers who compete in the retail market. We study the role of publicly announced list prices in this wholesale-retail setting, whether suppliers collude or compete. When suppliers collude, public announcements of list prices extend the possibility of collusion from small to large buyers (the multibuyer contact effect). When suppliers compete, these announcements provide them with commitment to negotiate better terms with large buyers (the commitment effect).