Cartel formation and managerial incentives

  1. Olaizola, Norma
Revue:
Spanish economic review

ISSN: 1435-5469

Année de publication: 2007

Volumen: 9

Número: 3

Pages: 219-236

Type: Article

DOI: 10.1007/S10108-006-9023-X DIALNET GOOGLE SCHOLAR

D'autres publications dans: Spanish economic review

Résumé

We study the formation of cartels within two different contexts. First, we consider internal–external stability based models which, due to firms’ free-riding incentives, lead to the inexistence of stable cartels. Second, we introduce the dynamic aspect of coalition formation. That is, when considering a cartel we consider also any cartel that can be reached through a succession of moves. Despite firms’ free-riding incentive, the dynamic process predicts that the collusion of the whole industry can occur with some regularity. We show that free-riding incentives decrease and incentives to merge increase when firms’ owner delegate production decisions to managers.

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