Delegation and Firms’ Ability to Collude: A Comment
7 Pages Posted: 18 Jan 2011
Date Written: December 22, 2010
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