Stock-related compensation acid product-market competition

Is show that as long as the stock market has perfect foresight, profits are distributed as dividends, and incentives are paid more than once or are deferred, stock-related compensation packages are strong incentives for managers to support tacit collusive agreements in repeated oligopolies. The stock market anticipates the losses from punishment phases and discounts them on stock prices, reducing mangers' short-run gains from any deviation. When deferred, stock-related incentives may remove all managers' short-run gains from deviation, making collusion supportable at any discount factor. The results hold with managerial contracts of any length.