Endogenous Monitoring in a Partnership Game
Keyword(s):
I consider a repeated game in which, due to imperfect monitoring, no collusion can be sustained. I add a self-interested monitor who commits to obtain private signals of firms’ actions and sends a public message. The monitor makes an offer specifying the precision of the signals obtained and the amount to be paid in return. First, with a low monitoring cost, collusive equilibria exist. Second, collusive equilibria are monitor-preferred. Third, in monitor-preferred equilibria, firms’ payoffs are decreasing in the discount factor. My model helps explain cartel agreements between self-interested parties and firms in legal industries in the United States and Europe. (JEL C73, D43, D82, L12)
Keyword(s):
1975 ◽
Vol 37
(2)
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pp. 641-642
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1995 ◽
Vol 53
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pp. 682-683
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1994 ◽
Vol 52
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pp. 454-455
2001 ◽
Vol 15
(01)
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pp. 53-87
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2009 ◽
1995 ◽
Vol 59
(1)
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pp. 19-57
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1978 ◽
Vol 42
(5)
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pp. 243-245
1985 ◽
Vol 49
(6)
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pp. 386-397
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