How do antitrust regimes impact on cartel formation and managers’ labor market? An experiment

Miguel A. Fonseca*, Ricardo Gonçalves, Joana Pinho, Giovanni A. Tabacco

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

2 Citations (Scopus)
35 Downloads

Abstract

We explore the impacts of different antitrust regimes on managers’ labor contracts, when shareholders are intent on their managers engaging in price fixing activities. We compare legal regimes that fine firms to regimes that prosecute managers. We build a theoretical model, which we take to the laboratory. We observe contract choices of shareholders for a given legal regime, as well as the probability of managers forming explicit cartels and coordinating on prices in a repeated Bertrand oligopoly, taking contract and legal regime as given. Our results suggest that there is less collusion when the legal regime prosecutes managers. High-powered contracts do not incentivize cartel formation or price coordination effectively, irrespective of legal regime. Nevertheless, high-powered contracts were most frequently chosen by shareholders, often with collusive intents.

Original languageEnglish
Pages (from-to)643-662
Number of pages20
JournalJournal of Economic Behavior and Organization
Volume204
DOIs
Publication statusPublished - Dec 2022

Keywords

  • Antitrust
  • Cartel formation
  • Experiment
  • Managerial compensation

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