Cheating and Compensation in Price-Fixing Cartels

  • 研討會日期 : 2021-01-11
  • 時間 : 10:30
  • 主講人 : Mr. Jihwan Do
  • 主持人 : Professor Chih-Chun Yang
  • 地點 : online
  • 演講者簡介 : Mr. Do will receive his Ph.D. in Economics from University of Rochester in 2021. His research fields are Game Theory, Industrial Organization, and Contract Theory. He is applying for a position of the Institute of Economics, Academia Sinica now.
  • 演講摘要 : While deliberate cheating and inter-firm compensation are often observed in the real-world cartels, existing literature fails to explain both in a unified framework. This paper aims to provide a theoretical explanation of “cheating and compensation on-path of play" using a canonical model of price-fixing collusion. The novel mechanism relies on firms playing mixed strategies allowing for coordination on monopoly price and price-cutting to happen with positive probability, together with a compensation scheme that punishes price-cutters. The mechanism is optimal in a restricted class of equilibria, and such price-cutting and compensation are necessary parts for any symmetric collusive equilibrium.