We analyze a multiple‐activity, principal‐agent model in which the activities are naturally substitutable for the agent and complementary for the principal. A basic result is that the optimal compensation must cause the agent to view the activities as complements. This complementarity is achieved by employing a compensation scheme that is typically nonmonotone and makes success on multiple dimensions the sole source of large rewards. A number of empirical implications follow, along with explanations for some existing empirical findings. We also discuss applications to compensation in specific occupations.

We analyze the competitive effects of mergers in markets with buyer power. Using mechanism design arguments, we show that without cost synergies, mergers harm buyers, regardless of buyer power. However, buyer power mitigates the harm to a buyer from a merger of symmetric suppliers. With buyer power, a merger increases incentives for entry, increases investment incentives for rivals, and can increase investment incentives for merging parties. Because buyer power reduces the profitability of a merger, it increases the profitability of perfect collusion relative to a merger. Cost synergies can eliminate merger harm but also render otherwise profitable mergers unprofitable.

Using a natural experiment from a retail gasoline antitrust case, we study how asymmetric information sharing affects oligopoly pricing. Empirically, price competition softens when, following case settlement, information sharing shifts from symmetric to asymmetric, with one firm losing access to high-frequency granular rival price data. We provide theory and empirics illustrating how strategic ignorance creates price commitment, leading to higher price-cost margins. Using a structural model, we find substantial profit-enhancing effects of asymmetric information sharing. These results provide a cautionary tale for antitrust agencies regarding the potential unintended consequences of limiting price information sharing among firms.