Collusion and Price Rigidity

We consider an infinitely repeated Bertrand game, in which prices are publicly observed and each firm receives a privately observed, i.i.d. cost shock in each period. We focus on symmetric perfect public equilibria, wherein any "punishments" are borne equally by all firms. We identify a tradeoff that is associated with collusive pricing schemes in which the price to be charged by each firm is strictly increasing in its cost level: such "fully sorting" schemes offer efficiency benefits, as they ensure that the lowest-cost firm makes the current sale, but they also imply an informational cost (distorted pricing and/or equilibrium-path price wars), since a higher-cost firm must be deterred from mimicking a lower-cost firm by charging a lower price. A rigid-pricing scheme, where a firm's collusive price is independent of its current cost position, sacrifices efficiency benefits but also diminishes the informational cost. For a wide range of settings, the optimal symmetric collusive scheme requires (i) the absence of equilibrium-path price wars and (ii) a rigid price. If firms are sufficiently impatient, however, the rigid-pricing scheme cannot be enforced, and the collusive price of lower-cost firms may be distorted downward in order to diminish the incentive to cheat. When the model is modified to include i.i.d. public demand shocks, the downward pricing distortion that accompanies a firm's lower-cost realization may occur only when current demand is high.     

Collusion and biased tournaments

Tournaments are vulnerable to collusion. This paper finds that biased tournaments can be more effective at preventing collusion than unbiased ones. When agents can collude to exert low effort, introducing some bias into tournaments generates opposite effects on favored and disfavored agents׳ respective incentives to exert high effort and provides strong incentives for the favored agent to deviate from collusion. Introducing an adequate degree of bias reduces the principal׳s incentive cost for preventing collusion; however, granting excessive bias instead increases the incentive cost. We show that the optimal level of bias can be endogenously determined.     

Collusion and Information Exchange

Antitrust authorities view that exchange of individual firms’ sales data is more anti‐competitive than that of aggregate sales data. In this paper, I survey antitrust implications of such inter‐firm information exchange. I argue that both types of information exchange are anti‐competitive under some circumstances. More precisely, I compare profits when each type of information exchange is allowed to that when firms can only observe their own sales (Stigler’s secret price‐cutting model), and the former is bigger than the latter. I also provide a general method to bound the equilibrium profits without such information exchange.     

Collusion and discrimination in organizations

In a principal-multi-agent setting we investigate how optimal contracts should be modified under relative performance evaluation when agents collude. Agents may write side-contracts, which are not contingent on their effort choices but indirectly control them through side-transfers. We show that the optimal collusion-proof contract is to introduce a “discriminatory policy” in the sense that the wage schemes offered to agents depend on their identities even if they are identical with respect to productive abilities. Such discriminatory wage schemes explain the organizational strategy of “divide and conquer” as an optimal response to collusion.     

市场互联性、关系型合约与经济转型

本文通过将单一市场的关系型合约推广到互联的关系型合约,刻画了社会分工程度(市场范围)与微观治理机制(基于关系型合约的治理还是基于正式合约的治理)之间的互动关系:基于何种合约来治理受市场范围的影响,市场范围越小,关系型合约越重要,正式合约越不重要;反之则反是。特别地,从这个视角看,计划经济向市场经济转型的过程,是劳动分工不断深化和市场范围不断扩大的过程,在微观治理上是一个从互联的关系型合约不断向正式合约过渡的过程。中国的渐进式改革之所以成功,很大程度上是由于渐进式改革使原来自我实施的关系型合约没有受到很大程度的破坏,在正式合约缺位时,关系型合约仍然能够维持社会经济的运行;俄罗斯的激进式改革几乎在一夜之间破坏了自我实施的关系型合约的可维持性,而短期内又不可能建立依赖正式合约的治理模式,出现了微观治理失效。本文还解释了中国经济在缺乏正式的法律和产权体系下取得骄人绩效的“悖论”,即由于关系型合约的自我实施性,因而并不需要相应的正式制度安排。本文总体上支持“后华盛顿共识”的渐进改革路径,并为其提供了动态的微观机制。     

Merger,Partial Collusion and Relocation

We set up a three-firm model of spatial competition to analyse how a merger affects the incentives for relocation, and conversely, how the possibility of relocation affects the profitability of the merger, particularly for the non-participating firm. We also consider the cases of partial collusion in either prices or locations. Under the assumption of mill pricing, we find that a merger will generally induce the merger participants to relocate, but the direction of relocation is ambiguous, and dependent on the degree of convexity in the consumers transportation cost function. Furthermore, we identify a set of parameter values for which the free-rider effect of a merger vanishes, implying that the possibility of relocation could solve the merger paradox.Acknowledgement We thank Jonathan Cave, Frode Meland, participants at the Royal Economic Society Conference 2003 and an anonymous referee for valuable comments.     

Collusion in homogeneous and heterogeneous tournaments

In tournaments, only the relative performance of agents is important. Therefore, the agents have an incentive to collude by jointly deviating to low effort levels. Previous papers on collusion have proposed to make the tournament asymmetric to prevent agents from colluding. However, by allowing side payments between the agents and focusing on implicit enforcement of collusion, the current study demonstrates that this is not true. Often, the principal prefers to hire homogeneous agents to make collusions less stable.     

Product Market Integration and Union Collusion

This paper investigates the effects of product market integration on the incentives and scope for union collusion across borders. In the absence of binding agreements, the impact of this process on the unions’ willingness to collude depends both on the degree of product market integration and on the degree of substitutability among traded goods. Where trade barriers across countries are relatively low, implicit cross‐border collusion among unions is more difficult the more integrated are product markets and the less substitutable are traded goods.     

环境监管中的博弈分析

通过建立环境监管问题的完全信息动态博弈模型,文章证明了在适宜的制度环境条件下,合谋可能是企业与地方政府的最优选择。针对优化制度环境,文章提出要加大来自上级政府的监督与制裁力度,改革地方政府的绩效考评制度等政策建议,以期改善地方环境状况。     

Exchange Agreements Facilitate Collusion

A duopoly model with quantity competition is analyzed in which firms collude in two markets. There is specialization in production in order to promote efficiency. Firms may then either exclusively market one good each, or they may agree to exchange goods and cross-supply a part of the production to the other firm. It is shown that, compared to specialization in marketing, positive exchanges of goods relax the incentive constraints that limit the extent of collusion.     

Undominated Nash Implementation with Collusion and Renegotiation

This article looks at implementation in economic environments when agents have perfect information about the state of the world, but cannot commit not to renegotiate bad outcomes or to collude against each other. If renegotiation satisfies a weak condition of disagreement point monotonicity, then any Pareto-efficient social choice function can be implemented if there are at least three agents who play undominated Nash equilibria. The mechanism does not use modulo or integer games, has no bad mixed strategy equilibria, and is “bounded.”Journal of Economic LiteratureClassification Number: D71.     

Collusion and the organization of delegated expertise

We study the optimal design of incentive contracts for experts in different collusion environments, and explore implications for the organization of delegated expertise. We consider a principal relying on experts to gather and report two signals about a project's value. The principal can have a single expert gather both signals or two experts gather one signal each. We show that absent collusion, the multiexpert organization dominates the single expert organization. However, this ranking is reversed when the experts can collude among themselves (horizontal collusion) and with the principal (vertical collusion).     

Reciprocal Supervision,Collusion and Organizational Design

We study the design of supervisory functions in an organization with one principal and two agents. Each agent can perform supervision activities regarding the other agent. We characterize the way the principal must structure incentive payments to avoid any collusive activity between agents. In particular, it is shown that better mutual information between agents may hurt the principal. The other main result is the possibility that it may be better to give up one supervisory function or to have a third party be the supervisor if possible. Finally, we show that such a dual supervisory structure raises the possibility that letting collusion happen may be the best policy.     

Tacit Collusion and Non–uniform Prices

This article examines the possibility of building a tacit agreement between price–setters that yields non–uniform pricing. It is shown that firms with market power may restrict competition not only by alternating between periods of high prices and low prices (Green and Porter (1984), Rotemberg and Saloner (1986)), but also by always charging different prices and taking turns in being the monopolist. In contrast with the existing literature, price variability is not due to imperfect monitoring, stochastic demand or short–run pricing rigidity but it is a pure supply side effect. The author provides the necessary conditions to have collusion with non–uniform pricing, and shows that the latter dominates a fixed price solution. In terms of competition policy this result confirms that no price parallelism is not, per se , a signal of no collusion.     

产品差别化、价格战与合谋

随着中国市场化改革的不断深入,价格战成为各行各业企业间不断上演的舞台剧。文章旨在从产品差别化与企业间合谋的相互关系出发,来分析企业频繁选择价格竞争而难以进行合谋的原因,即产品垂直差别水平的降低将使合谋难以维持,价格战容易爆发。因此,解决价格战的途径之一是中国企业应该加大自主创新的能力,提高产品垂直差别化程度。     

Through Trial and Error to Collusion*

In this article we study a very simple trial and error learning process in the context of a Cournot oligopoly. Without any knowledge of the payoff functions players increase, respectively decrease, their quantity as long as this leads to higher profits. We show that despite the absence of any coordination or punishing device this process converges to the joint‐profit‐maximizing outcome.     

Collusion and group lending with adverse selection

In an environment with correlated returns, this paper characterizes optimal lending contracts when the bank faces adverse selection and borrowers have limited liability. Group lending contracts are shown to be dominated by revelation mechanisms which do not use the ex post observability of the partners' performances. However, when collusion between borrowers under complete information is allowed, group lending contracts are optimal in the class of simple revelation mechanisms (which elicit only the borrower's own private information) and remain useful with extended revelation mechanisms.     

Mechanism Design under Collusion and Uniform Transfers

We study mechanism design under collusion focusing on the transaction costs in coalition formation created by asymmetric information among agents. In our setting, the regulator is constrained to use uniform transfers and this generates room for collusion between the regulated firms. We first show that when the gains from collusion are smaller than a threshold, the firms fail to realize the gains because of transaction costs. When the gains are larger than the threshold, we characterize the optimal collusion‐proof mechanism. Finally, we show that when the regulator is constrained to use uniform transfers, the collusion‐proofness principle does not hold.