Delegation and Strategic Collusion under Antitrust Policies: An Experiment
36 Pages Posted: 6 May 2022 Last revised: 1 Dec 2023
Date Written: April 30, 2022
Abstract
In a delegation, firm behavior can vary depending on how firm owners determine the incentives of corporate executives who operate firms directly. This study employs a lab experiment to investigate the impact of delegation on collusive behavior of firms in a situation where antitrust policies exist. The experiment highlights the following two key findings: (i) Firms form cartels in a strategic way by intermittently adjusting their collusive and competitive output, thereby evading antitrust regulations, rather than consistently collusive output to maximize joint profits. (ii) delegation does not necessarily increase the overall number of cartels, but it may change how to form a cartel.
Keywords: Delegation, Collusion, Cartel, Antitrust
JEL Classification: C9 K21 L4 L44
Suggested Citation: Suggested Citation