Collusion as an Informed Principal Problem
AbstractIn this paper we address the question of collusion in mechanisms under asymmetric information. We develop a methodology to analyze collusion as an informed principal problem. First, if collusion occurs after the agents accept or reject the principal's offer; the dominant-strategy implementation of the optimal contract without collusion is collusion proof. Second, we look at a different timing, assuming that the agents' decision to accept or reject the principal's offer is taken after collusion, so agents can collude on their participation decisions. We also assume that the collusion offer includes a punishment strategy, to be used whenever the other agent rejects the side contract. We establish the conditions that have to be satisfied for a contract to be collusion proof and we show that the optimal contract without collusion is no longer collusion proof. The optimal collusion proof contract is asymmetric, both in transfers and in quantities.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by EconWPA in its series Game Theory and Information with number 0504002.
Length: 40 pages
Date of creation: 06 Apr 2005
Date of revision:
Note: Type of Document - pdf; pages: 40
Contact details of provider:
Web page: http://18.104.22.168
Collusion; Informed Principal; Mechanism Design;
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
This paper has been announced in the following NEP Reports:
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Felli, Leonardo & Hortala-Vallve, Rafael, 2011.
"Preventing Collusion through Discretion,"
CEPR Discussion Papers
8302, C.E.P.R. Discussion Papers.
- Vasiliki Skreta, 2007.
"On the Informed Seller Problem: Optimal Information Disclosure,"
843644000000000222, UCLA Department of Economics.
- Vasiliki Skreta, 2011. "On the informed seller problem: optimal information disclosure," Review of Economic Design, Springer, vol. 15(1), pages 1-36, March.
- Vasiliki Skreta, 2008. "On the Informed Seller Problem: Optimal Information Disclosure," Working Papers 08-10, New York University, Leonard N. Stern School of Business, Department of Economics.
- Vasiliki Skreta, 2007. "On the Informed Seller Problem: Optimal Information Disclosure," Levine's Bibliography 122247000000001789, UCLA Department of Economics.
- Meng, Dawen & Tian, Guoqiang, 2008. "Nonlinear Pricing with Arbitrage: On the Role of Correlation," MPRA Paper 41207, University Library of Munich, Germany.
- Che,Y.-K. & Kim,J., 2004. "Collusion-proof implementation of optimal mechanisms," Working papers 4, Wisconsin Madison - Social Systems.
- Cécile Aubert & Jerôme Pouyet, 2004.
"Incomplete Regulation, Market Competition and Collusion,"
2004-39, Centre de Recherche en Economie et Statistique.
- Cécile Aubert & Jérôme Pouyet, 2006. "Incomplete regulation, market competition and collusion," Review of Economic Design, Springer, vol. 10(2), pages 113-142, August.
- Jansen, Jos & Jeon, Doh-Shin & Menicucci, Domenico, 2008. "The organization of regulated production: Complementarities, correlation and collusion," International Journal of Industrial Organization, Elsevier, vol. 26(1), pages 327-353, January.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA).
If references are entirely missing, you can add them using this form.