Essays on the economics of collusion and communication

Zusammenfassung

THIS THESIS, WHICH HAS TWO MAIN PARTS, ILLUSTRATES, WITH DIFFERENT TOOLS, TWO ECONOMIC APPLICATIONS IN WHICH COMMUNICATION AS COOPERATION OR/AND COLLUSION AND GROUP FORMATION ARE THEIR CENTRAL THEMES. IN PART ONE OF THIS DISSERTATION, I CONSIDER INDIVIDUAL FIRMS WHICH COMMUNICATED WITH EACH OTHER THROUGH BILATERAL COLLUSIVE RELATIONSHIPS. THE SET OF THESE RELATIONS GIVES RISE TO A NETWORK WHICH UNDER SUSPICION BY ANTITRUST AUTHORITIES. THIS PART IS CONCENTRATED ON UNDERSTANDING (I) HOW A NETWORK EMERGES; (II) WHICH KIND OF NETWORK PREVAILS OVERTIME; AND (III) HOW NETWORK STRUCTURES AFFECT ECONOMIC OUTCOMES WHEN AN ANTITRUST AUTHORITY EXISTS. THIS PART SHOWS THAT ANTITRUST LAWS MAY HAVE A PRO-COMPETITIVE EFFECT AS THEY GIVE FIRMS IN LARGE ALLIANCES MORE INCENTIVES TO CUT THEIR AGREEMENTS AT ONCE. THE GOAL OF THE SECOND PART IS TO UNDERSTAND THE OPTIMAL DESIGN OF INCENTIVE WHEN A PRINCIPAL IS RELYING ON EXPERTS TO DECIDE WHETHER UNDERTAKE A CERTAIN PROJECT. EXPERTS MAY ACQUIRE AND REPORT TO PRINCIPAL ACCURATE INFORMATION. THIS PART EXPLORES IMPLICATIONS FOR THE ORGANIZATION OF EXPERTISE. IT CONCLUDES THAT WHEN THE ADVANTAGES OF COOPERATION OUTWEIGH THE DISADVANTAGES OF COLLUSION, COMMUNICATION MAY IMPROVE THE PRINCIPAL'S WELFARE. WHEN THE NUMBER OF AGENTS IS GREATER THAN TWO, IT IS POSSIBLE TO PARTITION THE SET OF EXPERTS IN TWO GROUPS SUCH ONLY THE MEMBERS OF THAT GROUP CAN COMMUNICATE WITH EACH OTHER. IN THIS CASE, THE PRINCIPAL CAN TAKE ADVANTAGE NOT ONLY OF COOPERATION INSIDE EACH ALLIANCE BUT ALSO OF COMPETITION AMONG GROUPS. THEREFORE, A SET OF ALLIANCES MAY DOMINATE ONLY ONE GRAND ALLIANCE, AND IN ANY CASE, THE PRINCIPAL IS BETTER OFF WHEN EXPERTS COMMUNICATE WITH EACH OTHER.