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Mechanism design with tacit collusion


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  • Atila Abdulkadiroglu

    (Department of Economics, Columbia University)

  • Kim-Sau Chung

    (Northwestern University - Department of Economics)

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    In the mechanism design literature, collusion is often modelled as agents signing side contracts. This modelling approach is in turn implicitly justified by some unspecified repeated-interaction story. In this paper, we first second-guess what kind of repeated-interaction story these side-contract theorists (would admit that they) are having in mind. We then show that, within this repeated-interaction story, there is a big difference between communicative and tacit collusion. While communicative collusion hurts the mechanism designer, tacit collusion is exploitable.

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    Bibliographic Info

    Paper provided by Columbia University, Department of Economics in its series Discussion Papers with number 0102-68.

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    Length: 26 pages
    Date of creation: 2002
    Date of revision:
    Handle: RePEc:clu:wpaper:0102-68

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