Thursday, July 7, 2011
Posted by D. Daniel Sokol
Jean-Daniel Guigou (Luxembourg School of Finance, University of Luxembourg), Patrick De Lamirande (Shannon School of Business, Canada), and Bruno Lovat (University of Nancy) asks Strategic delegation and collusion: Do incentive schemes matter?
ABSTRACT: This paper introduces delegation decisions and contracts based on relative performance evaluation (RPE) in the analysis of cartel stability. We follow the approach developed by Lambertini and Trombetta , where manager's compensation combines pro_ts and sales (CPS) instead. Some of our results are similar while others are distinct from those of Lambertini and Trombetta. In particular, we show that collusion under RPE is always harder to sustain than under CPS.