In this paper we investigate the impact of vertical mergers on upstream firms’ ability to sustain collusion. We show in a number of models that the net effect of vertical integration is to facilitate collusion. Several effects arise. When upstream offers are secret, vertical mergers faciliate collusion through the operation of a foreclosure effect: Cheating unintegrated firms can no longer prof...

Ishiguro(2004) shows that discriminatory wage schemes are optimal among collusion-proof contracts under relative performance evaluation when agents collude. However, that analysis depends on the assumption that the agents cannot observe their performances. We investigate how optimal contracts should be modified when the agents observe the realized firm value. We show that the optimal collusion-...

We resolve redundancies in the characterizations of the Banzhaf value suggested by Haller (1994, Int J Game Theory 23, 261–281) and Malawski (2002, Int J Game Theory 31:47–67). In particular, we show that the collusion properties employed by them are equivalent. Combined with the dummy player axiom, any of the collusion properties has strong symmetry implications whenever the cardinality of the...

We analyze a principal-supervisor-two-agent hierarchy with inefficient supervision. The supervisor may collect an incorrect signal on the agents' effort levels. When reporting to principal, collude one or both agents manipulate in exchange for bribe. In hierarchy, we identify new trade-off between supervision and supervisor-agent collusion: Due supervisory signal, truthfully under collusion pro...