Optimal Collusion with Internal Contracting

Gea M. Lee

Development Economics Working Papers from East Asian Bureau of Economic Research

Abstract: In this paper, we develop a model of collusion in which two firms play an infinitelyrepeated Bertrand game when each firm has a privately-informed agent. The colluding firms, fixing prices, allocate market shares based on the agents information as to cost types. We emphasize that the presence of privately-informed agents may provide firms with a strategic opportunity to exploit an interaction between internal contracting and market-sharing arrangement : the contracts with agents may be used to induce firms truthful communication in their collusion, and collusive market-share allocation may act to reduce the agents information rents.

Keywords: Optimal collusion; internal contract; privately-informed agents; price-fixing (search for similar items in EconPapers)
JEL-codes: C73 L13 L14 (search for similar items in EconPapers)
Date: 2008-01
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Optimal collusion with internal contracting (2010)
Working Paper: Optimal Collusion with Internal Contracting (2008)
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