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The Organization of Supplier Networks: Effects of Delegation and Intermediation

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Author Info
Dilip Mookherjee
Masatoshi Tsumagari

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Abstract

In a one-principal two-agent model with adverse selection and collusion among agents, we show that delegating to one agent the right to subcontract with the other agent always earns lower profit for the principal compared with centralized contracting. Delegation to an intermediary is also not in the principal's interest if the agents supply substitutes. It can be beneficial if the agents produce complements and the intermediary is well informed. Copyright The Econometric Society 2004.

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File URL: http://hdl.handle.net/10.1111/j.1468-0262.2004.00529.x
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Article provided by Econometric Society in its journal Econometrica.

Volume (Year): 72 (2004)
Issue (Month): 4 (07)
Pages: 1179-1219
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Handle: RePEc:ecm:emetrp:v:72:y:2004:i:4:p:1179-1219

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  1. Martimort, David & Pouyet, Jérôme, 2006. "'Build It or Not': Normative and Positive Theories of Public-Private Partnerships," CEPR Discussion Papers 5610, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  2. Thomas Tröger & Tymofiy Mylovanov, 2008. "Optimal Auction Design and Irrelevance of Private Information," Bonn Econ Discussion Papers bgse21_2008, University of Bonn, Germany. [Downloadable!]
  3. Gorkem Celik, 2008. "Counter Marginalization of Information Rents: Implementing Negatively Correlated Compensation Schemes for Colluding Parties," The B.E. Journal of Theoretical Economics, Berkeley Electronic Press, vol. 8(1). [Downloadable!]
  4. Celik, Gorkem, 2004. "Counter Marginalization of Information Rents under Collusion," Micro Theory Working Papers celik-04-01-23-02-48-07, Microeconomics.ca Website, revised 27 Jan 2008. [Downloadable!]
  5. Jonathan Treussard, 2005. "Life-Cycle Consumption Plans and Portfolio Policies in a Heath-Jarrow-Morton Economy," Boston University - Department of Economics - Working Papers Series WP2005-033, Boston University - Department of Economics. [Downloadable!]
  6. Celik, Gorkem, 2004. "Mechanism Design with Collusive Supervision," Micro Theory Working Papers celik-04-09-13-05-42-19, Microeconomics.ca Website, revised 06 Aug 2008. [Downloadable!]
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  7. Choe, Chongwoo & Ishiguro, Shingo, 2008. "On the (Sub)optimality of Multi-tier Hierarchies: Coordination versus Motivation," MPRA Paper 13451, University Library of Munich, Germany. [Downloadable!]
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  8. Dequiedt, V., 2006. "Ratification and veto constraints in mechanism design," Working Papers 200606, Grenoble Applied Economics Laboratory (GAEL). [Downloadable!]
  9. Jaideep Roy & Prabal Roy Chowdhury, 2008. "Public-private partnerships in microfinance: Should NGO involvement be restricted?," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers 08-11, Indian Statistical Institute, New Delhi, India. [Downloadable!]
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  10. Michela Cella, 2005. "Monitoring Subcontracting in a Suppliers` Hierachy," Economics Series Working Papers 233, University of Oxford, Department of Economics. [Downloadable!]
  11. Yeon-Koo Che & Jinwoo Kim, 2005. "Robustly collusion-proof implementation," Discussion Papers 0506-12, Columbia University, Department of Economics. [Downloadable!]
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  12. Nicolas Gruyer, 2008. "Optimal Auctions when a seller is bound to sell to collusive bidders (new version of "using lotteries ...")," Economics Working Papers 06, LEEA (air transport economics laboratory), ENAC (french national civil aviation school). [Downloadable!]
  13. Dequiedt, V., 2006. "Efficient collusion in optimal auctions," Working Papers 200607, Grenoble Applied Economics Laboratory (GAEL). [Downloadable!]
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