How do antitrust regimes impact on cartel formation and managers’ labor market? An experiment

Miguel Fonseca, Ricardo Gonçalves, Joana Pinho and Giovanni A. Tabacco

Journal of Economic Behavior & Organization, 2022, vol. 204, issue C, 643-662

Abstract: We explore the impacts of different antitrust regimes on managers’ labor contracts, when shareholders are intent on their managers engaging in price fixing activities. We compare legal regimes that fine firms to regimes that prosecute managers. We build a theoretical model, which we take to the laboratory. We observe contract choices of shareholders for a given legal regime, as well as the probability of managers forming explicit cartels and coordinating on prices in a repeated Bertrand oligopoly, taking contract and legal regime as given. Our results suggest that there is less collusion when the legal regime prosecutes managers. High-powered contracts do not incentivize cartel formation or price coordination effectively, irrespective of legal regime. Nevertheless, high-powered contracts were most frequently chosen by shareholders, often with collusive intents.

Keywords: Cartel formation; Antitrust; Managerial compensation; Experiment (search for similar items in EconPapers)
JEL-codes: C70 C90 L13 L44 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:204:y:2022:i:c:p:643-662

DOI: 10.1016/j.jebo.2022.10.031

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