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Let’s Collude

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  • Aghadadashli, Hamid

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.

Suggested Citation

  • Aghadadashli, Hamid, 2020. "Let’s Collude," CEPR Discussion Papers 15241, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:15241
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    References listed on IDEAS

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    More about this item

    Keywords

    Collusion; Communication; Imperfect information; Managerial firms; Oligopoly; Antitrust fines; Incentive schemes;
    All these keywords.

    JEL classification:

    • C79 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Other
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law

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