Delegation and Firms’ Ability to Collude: A Comment
7 Pages Posted: 18 Jan 2011
Date Written: December 22, 2010
Abstract
Lambertini and Trombetta (2002) extend Vickers’ (1985) Cournot model of strategic delegation to an infinitely repeated setting and conclude that delegation does not affect cartel stability if managers collude. This result rests on the assumption that managers are rational, but owners are not. This note shows that if owners behave fully rational, then delegation improves cartel stability if managers collude.
Keywords: delegation, cartel stability
JEL Classification: D43, L13, L21
Suggested Citation: Suggested Citation
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