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Competition and Misconduct

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  • JOHN THANASSOULIS

Abstract

Misconduct is widespread. Practices such as misselling, pump and dump, and money laundering cause harm while raising profits. This paper presents a mechanism that can determine what sorts of misconduct can be sustained in competitive equilibrium in concentrated markets, oligopoly settings, and markets with many small competing firms. The model studied allows general demand and distinguishes types of ethical dilemma using current psychological understanding. The paper shows, for example, that markets with many small competing firms are not vulnerable to misconduct if firms respond to entry with niche strategies or if the ethical dilemma draws an emotional response.

Suggested Citation

  • John Thanassoulis, 2023. "Competition and Misconduct," Journal of Finance, American Finance Association, vol. 78(4), pages 2277-2327, August.
    • Handle: RePEc:bla:jfinan:v:78:y:2023:i:4:p:2277-2327
    DOI: 10.1111/jofi.13227
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    Cited by:

    1. Islam, Emdad & Loriot, Blake & Rahman, Lubna, 2025. "The impact of product market competition on workplace safety," Journal of Corporate Finance, Elsevier, vol. 93(C).
    2. Alper Arslan & Robert Clark & Qidi Hu, 2025. "Auctions vs Negotiations under Corruption: Evidence from Land Sales in China," Working Paper 1524, Economics Department, Queen's University.
    3. Lambertsen, Nikolaj Niebuhr & Poulsen, Morten Lund, 2024. "Overconfidence and ethical contracts," Economics Letters, Elsevier, vol. 241(C).
    4. Le Wang & Xin (Robert) Luo & Liangfei Qiu & Feng Xu & Xueying Cui, 2025. "Win by Hook or Crook? Self-Injecting Favorable Online Reviews to Fight Adjacent Rivals," Information Systems Research, INFORMS, vol. 36(3), pages 1333-1353, September.

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