Delegation and Firms’ Ability to Collude: A Comment

Abstract

Lambertini and Trombetta (2002) extend Vickers’ (1985) Cournot model of strategic delegation to an infinitely repeated setting and conclude that delegation does not affect cartel stability if managers collude. This result rests on the assumption that managers are rational, but owners are not. This note shows that if owners behave fully rational, then delegation improves cartel stability if managers collude.