Let’s Collude

Hamid Aghadadashli
Authors registered in the RePEc Author Service: Patrick Legros

No 15241, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Managers have imperfect information about each other’s willingness to collude and may signal this willingness through direct communication or market actions. Owners offer bonuses to managers and trade off productive effort provision, higher profits if managers coordinate on high prices, and the risk of antitrust fines if managers explicitly communicate. Our model shows that the distribution of fines between the owners and the managers is crucial for com- munication to be informative. High or low bonuses can reflect the willingness of owners to induce managers to explicitly communicate, and are red flags for corporate responsibility when collusion is supported by direct communication.

Keywords: Collusion; Communication; Imperfect information; Managerial firms; Oligopoly; Antitrust fines; Incentive schemes (search for similar items in EconPapers)
JEL-codes: C79 D43 D82 K21 (search for similar items in EconPapers)
Date: 2020-09
New Economics Papers: this item is included in nep-com, nep-gth, nep-law and nep-mic
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