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Fighting Collusion in Tournaments

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Author Info

  • Chen, Zhijun

Abstract

This paper proposes a new approach of fighting collusion in tournaments which sheds light on the principle of divide and conquer: the principal can benefit from manipulating information revelation, by which he brings asymmetric information between the agents and thus creates a distortion of efficiency in the coalition. We employ a simple tournament setting where, due to perfect collusion, the efficient effort levels are impossible to be implemented through simple mechanisms. We propose a sophisticated mechanism with a biased promotion rule that allows the principal to manipulate the revelation of information and make asymmetric information between the agents, which brings trade-offs between rent-extraction and distortion of efficiency into the coalition. We show that, it is possible to implement efficient effort levels under the sophisticated mechanism. JEL Classification: C72, D82

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 872.

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Date of creation: Nov 2006
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Handle: RePEc:pra:mprapa:872

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Keywords: collusion; tournament;

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References

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  1. Laffont, Jean-Jacques & Martimort, David, 1998. "Mechanism Design with Collusion and Correlation," IDEI Working Papers 81, Institut d'Économie Industrielle (IDEI), Toulouse.
  2. Edward P. Lazear & Sherwin Rosen, 1979. "Rank-Order Tournaments as Optimum Labor Contracts," NBER Working Papers 0401, National Bureau of Economic Research, Inc.
  3. Green, Jerry & Stokey, Nancy, 1983. "A Comparison of Tournaments and Contracts," Scholarly Articles 3203644, Harvard University Department of Economics.
  4. Laffont, J.J. & Martimort, D., 1996. "Collusion Under Asymmetric Information," Papers 95.389, Toulouse - GREMAQ.
  5. Chen, Zhijun, 2006. "Private Enforcement against Collusion in Mechanism Design," MPRA Paper 873, University Library of Munich, Germany.
  6. Tirole, Jean, 1986. "Hierarchies and Bureaucracies: On the Role of Collusion in Organizations," Journal of Law, Economics and Organization, Oxford University Press, vol. 2(2), pages 181-214, Fall.
  7. Itoh Hideshi, 1993. "Coalitions, Incentives, and Risk Sharing," Journal of Economic Theory, Elsevier, vol. 60(2), pages 410-427, August.
  8. Zhijun Chen, 2005. "Divide and Conquer," Labor and Demography 0504012, EconWPA.
  9. Myerson, Roger B., 1982. "Optimal coordination mechanisms in generalized principal-agent problems," Journal of Mathematical Economics, Elsevier, vol. 10(1), pages 67-81, June.
  10. Ishiguro, Shingo, 2004. "Collusion and discrimination in organizations," Journal of Economic Theory, Elsevier, vol. 116(2), pages 357-369, June.
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Cited by:
  1. Kräkel, Matthias & Schöttner, Anja, 2010. "Technology choice, relative performance pay, and worker heterogeneity," Journal of Economic Behavior & Organization, Elsevier, vol. 76(3), pages 748-758, December.
  2. Oliver Gürtler, 2010. "Collusion in homogeneous and heterogeneous tournaments," Journal of Economics, Springer, vol. 100(3), pages 265-280, July.

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