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Internal decision-making rules and collusion

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  • Alexander Rasch

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  • Achim Wambach

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Abstract

We study the impact of internal decision-making structures on the stability of collusive agreements. To this end, we use a three-firm spatial competition model where two firms belong to the same holding company. The holding company can decide to set prices itself or to delegate this decision to its local units. It is shown that when transportation costs are high, collusion is more stable under delegation. Furthermore, collusion with maximum prices is more profitable if price setting is delegated to the local units. Profitability is reversed for low discount factors.

Suggested Citation

  • Alexander Rasch & Achim Wambach, 2009. "Internal decision-making rules and collusion," Post-Print hal-00722791, HAL.
  • Handle: RePEc:hal:journl:hal-00722791
    DOI: 10.1016/j.jebo.2009.07.008
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00722791
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Emilie Dargaud & Armel Jacques, 2015. "Hidden collusion by decentralization: firm organization and antitrust policy," Journal of Economics, Springer, vol. 114(2), pages 153-176, March.
    2. Hasnas, Irina & Wey, Christian, 2015. "Full versus partial collusion among brands and private label producers," DICE Discussion Papers 190, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    3. Rasch, Alexander, 2017. "Compatibility, network effects, and collusion," Economics Letters, Elsevier, vol. 151(C), pages 39-43.
    4. Rasch, Alexander & Gössl, Florian, 2016. "The scope for collusion under different pricing schemes," Annual Conference 2016 (Augsburg): Demographic Change 145759, Verein für Socialpolitik / German Economic Association.
    5. Tsuyoshi Toshimitsu, 2017. "The optimal choice of internal decision-making structures in a network industry," Discussion Paper Series 166, School of Economics, Kwansei Gakuin University, revised Sep 2017.

    More about this item

    Keywords

    D43; L13; L41; Collusion; Delegation; Holding company; Merger; Nash bargaining solution;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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