We propose an axiomatic approach for equilibrium selection in the discounted, infinitely repeated symmetric Prisoner's Dilemma. Our axioms characterize a unique selection criterion that is also useful as a tool for applied comparative statics exercises as it results in a critical discount factor...

Collusive agreements and relational contracts are commonly modeled as equilibria of dynamic games with the strategic features of the repeated Prisoner's Dilemma. The pay-offs agents obtain when being ‘cheated upon’ by other agents play no role in these models. We propose a way to take these...

We propose a general framework for analyzing and comparing ownership structures with respect to creating incentives for co-operative behavior (e.g. efficient investment) in long-run relationships. We generalize models by Garvey (1995), Halonen (2002), and Baker, Gibbons and Murphy (2002) and...

The paper presents a theory of the anti-competitive effects of debt finance based on the interaction between capital structure, managerial incentives, and firms' ability to sustain collusive agreements. It shows that shareholders' commitments that reduce conflicts with debtholders - such as...

This paper shows that as long as agents in financial markets have rational expectations and firms pay out dividends, most common stock-based managerial compensation plans greatly facilitate tacit collusion in long-run (repeated) oligopolies. They may make the joint monopoly agreement supportable...

The paper considers how the separation between ownership and control affects product-market competition in mature (repeated) oligopolies. It finds that as long as managers have a preference for smooth profits, as revealed by the empirical evidence on quot;income smoothing,quot; by delegating...

We study the specific corporate governance problems of central banks in their complex role of inflation guardians, bankers' banks, financial industry regulators/supervisors and, in some cases, competition authorities and deposit insurance agencies. We review the current institutional...

We model the impact of bank mergers on loan competition, banks' reserve holdings and aggregate liquidity. Banks compete in a differentiated loan market, hold reserves against liquidity shocks, and refinance in the interbank market. A merger creates an internal money market that induces financial...

This paper shows that as long as agents in financial markets have rational expectations and firms pay out dividends, most common stock-based managerial compensation plans greatly facilitate tacit collusion in long-run (repeated) oligopolies. They may make the joint monopoly agreement supportable...