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Collusion and Selective Supervision

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  • Alberto Motta

    ()
    (University di Padova)

Abstract

This paper studies the role of a policy of inducing in combating collusion within organizations, or in regulatory setups. In a mechanism-design problem involving a principal-supervisor-agent we show the role of endogenous selection of supervisory activity by the principal. One simple example is a mechanism in which the agent bypasses the supervisor and contracts directly with the principal in some states of the world. If collusion between supervisor and agent can occur only after they have decided to participate in the mechanism, this can costlessly eliminate collusion. This result is robust to alternative information structures, collusive behaviors and specification of agent's types. Applications include self-reporting of crimes, tax amnesties, immigration amnesties, work contracts specifying di¤erent degrees of discretion, mechanisms based on recommendation letters, embassies issuing immigration permits, and hiring committees.

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Bibliographic Info

Paper provided by Dipartimento di Scienze Economiche "Marco Fanno" in its series "Marco Fanno" Working Papers with number 0093.

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Length: 38 pages
Date of creation: 2009
Date of revision:
Handle: RePEc:pad:wpaper:0093

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Related research

Keywords: Collusion; supervision; delegation; mechanism design.;

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Cited by:
  1. Celik, Gorkem & Peters, Michael, 2011. "Equilibrium rejection of a mechanism," Games and Economic Behavior, Elsevier, Elsevier, vol. 73(2), pages 375-387.

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