Two Types of Collusion in a Model of Hierarchical Agency
AbstractThe standard ex post type of collusion is a supervisor-agent agreement to misrepresent the outcome of supervision. Under ex ante collusion the agent makes a side transfer to the supervisor, who, in return, stops monitoring the agent's productivity. Extending Tirole's  model of hierarchy to include ex ante collusion and supervision costs, we show that the principal can ignore ex ante collusion and the supervisor's incentive constraint if supervision technology is likely to generate information at a low cost. To prevent ex ante collusion the principal increases the difference between the wages paid when the supervisor's report is empty and when it contains productivity evidence.
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Bibliographic InfoArticle provided by Mohr Siebeck, Tübingen in its journal Journal of Institutional and Theoretical Economics.
Volume (Year): 162 (2006)
Issue (Month): 2 (June)
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Other versions of this item:
- Mehmet Bac & Serkan Kucuksenel, 2005. "Two Types of Collusion in a Model of Hierarchical Agency," Game Theory and Information 0508001, EconWPA.
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Laffont, Jean-Jacques, 1990. "Analysis of Hidden Gaming in a Three-Level Hierarchy," Journal of Law, Economics and Organization, Oxford University Press, vol. 6(2), pages 301-24, Fall.
- Bac, Mehmet, 1996. "Corruption, Supervision, and the Structure of Hierarchies," Journal of Law, Economics and Organization, Oxford University Press, vol. 12(2), pages 277-98, October.
- Kofman, Fred & Lawarree, Jacques, 1993. "Collusion in Hierarchical Agency," Econometrica, Econometric Society, vol. 61(3), pages 629-56, May.
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