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2011•RePEc: Research Papers in EconomicsOpen access

Strategic Delegation and Collusion: Do Incentive Schemes Matter?

Jean-Daniel Guigou, Patrick de Lamirande, Bruno Lovat

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Abstract

This paper introduces delegation decisions and contracts based on relative performance evaluation (RPE) in the analysis of cartel stability. We follow the approach developed by Lambertini and Trombetta [12], where manager's compensation combines pro_ts and sales (CPS) instead. Some of our results are similar while others are distinct from those of Lambertini and Trombetta. In particular, we show that collusion under RPE is always harder to sustain than under CPS.

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What this paper is about

This paper introduces delegation decisions and contracts based on relative performance evaluation (RPE) in the analysis of cartel stability. We follow the approach developed by Lambertini and Trombetta [12], where manager's compensation combines pro_ts and sales (CPS) instead. Some of our results are similar while others are distinct from those of Lambertini and Trombetta. In particular, we show that collusion under RPE is always harder to sustain than under CPS.

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Available abstract

This paper introduces delegation decisions and contracts based on relative performance evaluation (RPE) in the analysis of cartel stability. We follow the approach developed by Lambertini and Trombetta [12], where manager's compensation combines pro_ts and sales (CPS) instead. Some of our results are similar while others are distinct from those of Lambertini and Trombetta. In particular, we show that collusion under RPE is always harder to sustain than under CPS.

Key concepts: Collusion, Delegation, Cartel, Incentive, Compensation (psychology), Business, Microeconomics, Industrial organization

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