Common Marketing Agency as a Device for Facilitating Collusion

Abstract

In a variety of markets firms voluntarily and independently delegate control over certain aspects of marketing to common agents. In this article we present an explicit model of agency delegation where firms noncooperativelY select agents, name output prices, and choose compensation schemes. We exhibit an equilibrium in which all strategic variables-not merely the marketing choices delegated to agents, but prices as well-are selected perfectly cooperatively. This cooperative equilibrium is very simple and attractive. each firm sets the collusive output price, and employs a commission scheme to compensate the agent. Although each