Matthew Bloomfield, Catarina Marvão, Giancarlo Spagnolo, 09 October 2020

Theory suggests that the use of relative performance evaluation in managerial compensation should be widespread, but the evidence shows that this is not the case. This column argues that the potential for executives to seek to improve their relative standing by employing costly sabotage – for example, in the form of overly aggressive product market strategies – is an important deterrent to firms' use of relative performance evaluation. Explicit collusion mitigates this possibility, thereby facilitating more efficient risk-sharing between shareholders and executives.

Emilio Calvano, Giacomo Calzolari, Vincenzo Denicolò, Sergio Pastorello, 03 February 2019

Antitrust agencies are concerned that the autonomous pricing algorithms increasingly used by online vendors may learn to collude. This column uses experiments with pricing algorithms powered by AI in a controlled environment to demonstrate that even relatively simple algorithms systematically learn to play sophisticated collusive strategies. Most worrying is that they learn to collude by trial and error, with no prior knowledge of the environment in which they operate, without communicating with one another, and without being specifically designed or instructed to collude.

Lin William Cong, Zhiguo He, 05 July 2018

Blockchain technology provides decentralised consensus, which potentially enlarges the contracting space using tamper-proof smart contracts. But this implies distributed information. The column argues that there is a tension between these two features of blockchain. While complete contracts may increase competition, distributed information may also make collusion between incumbents more effective. 

Alminas Žaldokas, 21 June 2018

Investors ask companies for greater information disclosure in order to make better investment decisions. Alminas Žaldokas discusses his research on whether increased disclosure to investors may be helping firms collude on prices, harming consumers. This video was recorded at CEPR's Third Annual Spring Symposium.

Vasiliki Bageri, Yannis Katsoulacos, Giancarlo Spagnolo, 23 March 2014

Competition policy is central to the management of a modern economy. This column analyses some key distortions caused by competition policy and argues in favour of criminal sanctions in nations lacking resources for an appropriate fine-tuning of antitrust fines.

Duarte Brito, Ricardo Ribeiro, Helder Vasconcelos, 28 September 2013

Horizontal acquisitions affect prices through two channels: by eliminating competition between the firms involved, and by changing the incentives for collusion in the affected industry. This column summarises recent research that quantifies these two effects using a new methodology – one that accounts for the difference between financial interests and corporate control. A study of the disposable-razor industry shows that small firms have the greatest incentive to undercut pricing agreements. After acquisitions, acquiring firms have greater incentives to collude, whereas other firms in the industry are more likely to defect.

John List, 05 November 2009

Little is known about the basic economic principles of open-air markets and bazaars, which have existed for centuries. This column explores the fundamental underpinnings of such markets. While exchange prices approach the prediction of competitive market equilibrium theory, such markets are ripe for price manipulation.

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