Ownership, Control, and Collusion

Giancarlo Spagnolo

No 139, SSE/EFI Working Paper Series in Economics and Finance from Stockholm School of Economics

Abstract: The paper addresses the effects of the separation of ownership and control on long-run competition in oligopolies. It finds that when managers have the preference for smooth time-paths of profits revealed by the evidence on "income smoothing," manager-led firms can sustain any collusive agreement at lower discount factors than owner-led ones. Most common managerial incentives - "low-powered" schemes with monetary bonuses and/or incumbency rents - make collusion supportable at any discount factor. When managers are in control, "price wars during booms" need not occur: the most collusive price tends to be pro-cyclical.

Keywords: CEO compensation; delegation; collusion; oligopoly; managerial incentives; income smoothing; incumbency rents; ownership and control; governance (search for similar items in EconPapers)
JEL-codes: D43 G30 J33 L13 L21 (search for similar items in EconPapers)
Pages: 39 pages
Date: 1996-11, Revised 1999-12
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Citations: View citations in EconPapers (1)

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