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Collusion with Internal Contracting

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  • Gea M. Lee

Abstract

In this paper, an infinitely-repeated Bertrand game is considered. The model has a two-tier relationship; two firms make a self-enforced collusive agreement and each firm writes a law-enforced contract to its privately-informed agent. The main finding is that in optimal collusion, interaction between intra-firm (internal) contracting and inter-firm collusion may be exploited; inter-firm collusion may enhance the efficiency of internal contract, and conversely, internal contracting may facilitate collusion

Suggested Citation

  • Gea M. Lee, 2004. "Collusion with Internal Contracting," Econometric Society 2004 Far Eastern Meetings 693, Econometric Society.
    • Handle: RePEc:ecm:feam04:693
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    More about this item

    Keywords

    collusion; internal contract; repeated games; market allocation;
    All these keywords.

    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

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