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Abstract

In this paper, two firms play an infinitely-repeated Bertrand game, and each firm has an agent who produces the firm's output and holds private information about production costs. The colluding firms fix prices and allocate market shares based on their agents' information. We develop a model of collusion in which firms use the presence of agents as a strategic opportunity to restrict their incentives to distort private information. We show that such firm behavior may expand the scope of optimal collusion whether market-allocation schemes are asymmetric or symmetric.

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Bibliographic Info

Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 68 (2010)
Issue (Month): 2 (March)
Pages: 646-669

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Handle: RePEc:eee:gamebe:v:68:y:2010:i:2:p:646-669

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Web page: http://www.elsevier.com/locate/inca/622836

Related research

Keywords: Price-fixing collusion Private information Internal contract Information distortion;

Other versions of this item:

Find related papers by JEL classification:

• C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
• L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
• L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

References

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