Optimal Enforcement Policies Under the Threat of Collusion and Extortion
AbstractWe consider a model of enforcement where the Principal relies on the Supervisor for information on the Agents. We argue that optimal policies must consider both collusion and extortion possibilities. Both collusion and extortion can be prevented by mechanisms resembling appeals process. However, if appeals involve a net cost for the agents, then optimal enforcement policy may involve over-enforcement or under-enforcement.
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Bibliographic InfoPaper provided by Economic Studies, University of Dundee in its series Dundee Discussion Papers in Economics with number 184.
Length: 23 pages
Date of creation: Nov 2005
Date of revision:
Banking; Financial Stability; Bank Fragility; Options; Estonia;
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