Hidden collusion by decentralization: firm organization and antitrust policy. (English) Zbl 1402.91228
Summary: This paper develops a theory of the centralization of firms engaged in multi-market collusive agreements. A centralized organization (called the unitary or U-form) allows price coordination across several markets, whereas with decentralized (the multidivisional or M-form) firms the probability that the antitrust authority will find evidence of collusion on one market while investigating the other is lower. We show that the firm’s choice of internal structure depends to a large extent on product substitutability and the instruments used by the antitrust authority.
MSC:
| 91B38 | Production theory, theory of the firm |
References:
| [1] | Aghion, P; Tirole, J, Some implications of growth for organizational form and ownership structure, Eur Econ Rev, 39, 440-455, (1995) · doi:10.1016/0014-2921(94)00050-A |
| [2] | Aubert, C; Rey, P; Kovacic, W, The impact of leniency and whistle-blowing programs on cartels, Int J Ind Org, 24, 1241-1266, (2006) · doi:10.1016/j.ijindorg.2006.04.002 |
| [3] | Baccara, M; Bar-Isaac, H, How to organize crime, Rev Econ Stud, 75, 1039-1067, (2008) · Zbl 1144.91306 · doi:10.1111/j.1467-937X.2008.00508.x |
| [4] | Baker, WE; Faulkner, RR, The social organization of conspiracy: illegal networks in the heavy electrical equipment industry, Am Soc Rev, 58, 837-860, (1993) · doi:10.2307/2095954 |
| [5] | Baye, MR; Crocker, KJ; Ju, J, Divisionalization, franchising, and divestiture incentives in oligopoly, Am Econ Rev, 86, 223-236, (1996) |
| [6] | Belleflamme, P; Picard, P; Thisse, J-F, An economic theory of regional clusters, J Urban Econ, 48, 158-184, (2000) · doi:10.1006/juec.1999.2161 |
| [7] | Berkovitch, E; Israel, R; Spiegel, Y, A double moral hazard model of organizational design, J Econ Manage Strategy, 19, 55-85, (2010) · doi:10.1111/j.1530-9134.2009.00245.x |
| [8] | Bernheim BD, Whinston MD (1990) Multimarket contact and collusive behavior. Rand J Econ 21:1-26 |
| [9] | Besanko, D; Régibeau, P; Rockett, KE, A multi-task principal-agent approach to organizational form, J Ind Econ, 53, 437-467, (2005) · doi:10.1111/j.1467-6451.2005.00265.x |
| [10] | Besanko, D; Spulber, DF, Antitrust enforcement under asymmetric information, Econ J, 99, 408-425, (1989) · doi:10.2307/2234033 |
| [11] | Bloom, N; Sadun, R; Reenen, J, The organization of firms across countries, Q J Econ, 127, 1663-1705, (2012) · doi:10.1093/qje/qje029 |
| [12] | Chandler A Jr (1962) Strategy and structure: chapters in the history of the American industrial enterprise. MIT Press, Cambridge |
| [13] | Choi JP, Gerlach H (2009) Multi-market collusion with demand linkages and antitrust enforcement. Michigan State University, Mimeo |
| [14] | Connor, JM, The global lysine price-fixing conspiracy of 1992-1995, Rev Agric Econ, 19, 412-427, (1997) · doi:10.2307/1349749 |
| [15] | Creane, A; Davidson, C, Multidivisional firms, internal competition, and the merger paradox, Can J Econ, 37, 951-977, (2004) · doi:10.1111/j.0008-4085.2004.00255.x |
| [16] | Cyert, R; Kumar, P; Williams, J, Impact of organizational structure on oligopolistic pricing, J Econ Behav Org, 26, 1-15, (1995) · doi:10.1016/0167-2681(94)00006-Z |
| [17] | Dargaud E, Jacques A (2010) Hidden collusion by decentralization: firms’ organization and antitrust policy. CEMOI Working Paper · Zbl 1402.91228 |
| [18] | Garoupa, N, Optimal law enforcement and criminal organization, J Econ Behav Org, 63, 461-474, (2007) · doi:10.1016/j.jebo.2004.04.010 |
| [19] | Green, EJ; Porter, RH, Noncooperative collusion under imperfect price information, Econometrica, 52, 87-100, (1984) · Zbl 0526.90013 · doi:10.2307/1911462 |
| [20] | Hammond S.D (2009) Cornerstones of an effective leniency program, address at an international competition network workshop, Sydney (2004) |
| [21] | Harrington, JE, Post-cartel pricing during litigation, J Ind Econ, 52, 517-533, (2004) · doi:10.1111/j.0022-1821.2004.00238.x |
| [22] | Harrington, JE, Cartel pricing dynamics in the presence of an antitrust authority, Rand J Econ, 35, 651-673, (2004) · doi:10.2307/1593766 |
| [23] | Harrington, JE, Optimal cartel pricing in the presence of an antitrust authority, Int Econ Rev, 46, 145-169, (2005) · doi:10.1111/j.0020-6598.2005.00313.x |
| [24] | Harrington, JE, How do cartels operate?, Found Trends Microecon, 2, 1-105, (2006) · doi:10.1561/0700000021 |
| [25] | Harrington, JE; Chen, J, Cartel pricing dynamics with cost variability and endogenous buyer detection, Int J Ind Org, 24, 1185-1212, (2006) · doi:10.1016/j.ijindorg.2006.04.012 |
| [26] | Harris, M; Raviv, A, Organization design, Manage Sci, 48, 852-865, (2002) · doi:10.1287/mnsc.48.7.852.2821 |
| [27] | Huck, S; Konrad, KA; Müller, W, Profitable horizontal mergers without cost advantages: the role of internal organization, information and market structure, Economica, 71, 575-587, (2004) · doi:10.1111/j.0013-0427.2004.00389.x |
| [28] | Maskin, E; Qian, Y; Xu, C, Incentives, information, and organizational form, Rev Econ Studies, 67, 359-378, (2000) · Zbl 0985.90060 · doi:10.1111/1467-937X.00135 |
| [29] | Matsushima, H, Multimarket contact, imperfect monitoring, and implicit collusion, J Econ Theory, 98, 158-178, (2001) · Zbl 1016.91041 · doi:10.1006/jeth.2000.2708 |
| [30] | Pénard T (2000) Délégation ou centralisation des décisions: l’impact sur la collusion. Rev Econ 51:5-26 |
| [31] | Puschke, K, Task assignment and organizational form, J Econ, 96, 149-168, (2009) · Zbl 1175.90261 · doi:10.1007/s00712-008-0033-z |
| [32] | Qian, Y; Roland, G; Xu, C, Coordination and experimentation in M-form and U-form organizations, J Polit Econ, 114, 366-402, (2006) · doi:10.1086/501170 |
| [33] | Rasch, A; Wambach, A, Internal decision-making rules and collusion, J Econ Behav Org, 72, 703-715, (2009) · doi:10.1016/j.jebo.2009.07.008 |
| [34] | Souam, S, Optimal antitrust policy under different regimes of fines, Int J Ind Org, 19, 1-26, (2001) · doi:10.1016/S0167-7187(99)00007-7 |
| [35] | Spagnolo, G, On interdependent supergames: multimarket contact, concavity, and collusion, J Econ Theory, 89, 127-139, (1999) · Zbl 0934.91018 · doi:10.1006/jeth.1999.2548 |
| [36] | Spiegel, Y, Managerial overload and organization design, Econ Lett, 105, 53-55, (2009) · Zbl 1179.91118 · doi:10.1016/j.econlet.2009.05.014 |
| [37] | Tan, G; Yuan, L, Strategic incentives of divestitures of competing conglomerates, Int J Ind Org, 21, 673-697, (2003) · doi:10.1016/S0167-7187(02)00120-0 |
| [38] | Thomas, CJ; Willig, RD, The risk of contagion from multimarket contact, Int J Ind Org, 24, 1157-1184, (2006) · doi:10.1016/j.ijindorg.2006.04.009 |
| [39] | Vives X (1999) Oligopoly pricing: old ideas and new tools. MIT Press, Cambridge |
| [40] | Zhou, H, Market structure and organizational form, South Econ J, 71, 705-719, (2005) · doi:10.2307/20062075 |
This reference list is based on information provided by the publisher or from digital mathematics libraries. Its items are heuristically matched to zbMATH identifiers and may contain data conversion errors. In some cases that data have been complemented/enhanced by data from zbMATH Open. This attempts to reflect the references listed in the original paper as accurately as possible without claiming completeness or a perfect matching.
