Publication Type
Journal Article
Version
submittedVersion
Publication Date
2-2008
Abstract
In this paper, we develop a model of collusion in which two firms play an infinitelyrepeated Bertrand game when each firm has a privately-informed agent. The colluding firms, fixing prices, allocate market shares based on the agent’s information as to cost types. We emphasize that the presence of privately-informed agents may provide firms with a strategic opportunity to exploit an interaction between internal contracting and market-sharing arrangement: the contracts with agents may be used to induce firms’ truthful communication in their collusion, and collusive market-share allocation may act to reduce the agents’ information rents.
Keywords
Price-fixing collusion; Private information; Internal contract; Information distortion
Discipline
Econometrics
Research Areas
Applied Microeconomics
Publication
Games and Economic Behavior
Volume
68
Issue
2
First Page
646
Last Page
669
ISSN
0899-8256
Publisher
Elsevier
Citation
LEE, Gea Myoung.
Optimal Collusion with Internal Contracting. (2008). Games and Economic Behavior. 68, (2), 646-669.
Available at: https://ink.library.smu.edu.sg/soe_research/1027
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