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Collusion with Internal Contracting

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Author Info
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

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Paper provided by Econometric Society in its series Econometric Society 2004 Far Eastern Meetings with number 693.

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Date of creation: 11 Aug 2004
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Handle: RePEc:ecm:feam04:693

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Related research
Keywords: collusion; internal contract; repeated games; market allocation;

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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

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