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Antitrust Compliance: Managerial Incentives and Collusive Behavior
Author(s) -
Paha Johannes
Publication year - 2017
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.2840
Subject(s) - collusion , incentive , microeconomics , economics , profit (economics) , norm (philosophy) , cartel , compliance (psychology) , incentive compatibility , business , law , political science , psychology , social psychology
This article analyzes a manager's incentives to establish and sustain an illegal collusive agreement if her firm is subject to profit shocks, if her utility function is concave in profits (e.g., because of risk aversion), and if she incurs opportunity costs (e.g., by violating a social norm). The model supports the empirical observation that if collusion is to be established and sustained in a state with low profits, then this state must be quite persistent. It also indicates that compliance with antitrust laws can be ensured best by combining a zero tolerance policy with a strategy of forgiveness. Copyright © 2017 John Wiley & Sons, Ltd.