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Internal decision-making rules and collusion

[journal article]

Rasch, Alexander; Wambach, Achim

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Abstract We study the impact of internal decision-making structures on the stability of collusive agreements. To this end, we use a three-firm spatial competition model where two firms belong to the same holding company. The holding company can decide to set prices itself or to delegate this decision to its local units. It is shown that when transportation costs are high, collusion is more stable under delegation. Furthermore, collusion with maximum prices is more profitable if price setting is delegated to the local units. Profitability is reversed for low discount factors.
Keywords delegation of tasks
Classification Business Administration
Free Keywords D43; L13; L41; Collusion; Holding company; Merger; Nash bargaining solution
Document language English
Publication Year 2009
Page/Pages 703–715 p.
Journal Journal of Economic Behavior & Organization, 72 (2009) 2
DOI http://dx.doi.org/10.1016/j.jebo.2009.07.008
Status Postprint; peer reviewed
Licence PEER Licence Agreement (applicable only to documents from PEER project)