Colluding with a conscience

Rudy Santore (), Youping Li and Stephen Cotten ()

Journal of Economics, 2015, vol. 114, issue 3, 255-269

Abstract: Other-regarding preferences have been documented in many strategic settings. We provide a model in which the managers of firms in an oligopoly have preferences for both consumer welfare and own income. We find that profit sharing can function as a facilitating practice. Managers must receive a sufficiently large share of profits for collusion to be sustained, and the optimal collusive price increases with the degree of profit sharing. Thus, restrictions on performance-based compensation may be consistent with the objectives of antitrust policy. We also find that an increase in industry concentration can harm consumers even if the firms were already successfully colluding. Copyright Springer-Verlag Wien 2015

Keywords: Collusion; Antitrust policy; Behavioral economics; Incentive compensation; D43; K21; L13 (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:kap:jeczfn:v:114:y:2015:i:3:p:255-269

DOI: 10.1007/s00712-014-0390-8

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