Collusion By Asymmetricaly Informed Firms
AbstractWe analyze the implementation problem faced by firms when trying to collude in the face of asymmetric information about costs. Assuming that transfer payments are possible, we examine the incentive compatibility and individual rationality constraints that must be satisfied by any cartel agreement. Two scenarios are considered. Firms may or may not withdraw from the agreement after each firm's costs become known. If no withdrawal is possible, we find that the monopoly rule is implementable when weak types of individual rationality constraints are required. This contrasts with some results in the literature. If withdrawal is possible, we find a potential conflict between different forms of individual rationality constraints, in particular, between interim and ex post constraints. This conflict disappears in industries with a large number of firms. Copyright 1992 by MIT Press.
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Bibliographic InfoPaper provided by Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) in its series UFAE and IAE Working Papers with number 125-89.
Length: 27 pages
Date of creation: 1989
Date of revision:
enterprises ; information ; monopolies;
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