Citation

Discussion Paper Details

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Full Details

Title: Let's Collude

Author(s): Hamid Aghadadashli and Patrick Legros

Publication Date: September 2020

Keyword(s): Antitrust fines, Collusion, communication, imperfect information, Incentive Schemes, managerial firms and oligopoly

Programme Area(s): Industrial Organization

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.

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Bibliographic Reference

Aghadadashli, H and Legros, P. 2020. 'Let's Collude'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=15241