Risk Averse Supervisors and the Efficiency of Collusion
This paper studies the efficiency of collusion between supervisors and supervisees. Building on Tirole (1986)'s results that deterring collusion with infinitely risk averse supervisors is impossible, while it is costless to do so under risk neutrality, we develop here a theory of collusion based on a trade-off between the risk premia required by (less extreme) risk attitudes and incentives. This allows us to link the efficiency of collusion to the supervisor's risk aversion and to various parameters characterizing the economic environment in which collusion may take place. We are then able to derive implications for the design of organizations, like determining how the number of tasks/agents per supervisor or the level of competition may impact on the cost of collusion, studying the impact of vertical integration on those same costs, or characterizing the role of uncertainty on side-contracting.
If 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 2 (2003)
Issue (Month): 1 (January)
|Contact details of provider:|| Web page: http://www.degruyter.com|
|Order Information:||Web: http://www.degruyter.com/view/j/bejte|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Leonardo Felli & J. Miguel Villas-Boas, 2000. "Renegotiation and Collusion in Organizations," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(4), pages 453-483, December.
- Bull, Jesse & Watson, Joel, 2000.
"Evidence Disclosure and Verifiability,"
University of California at San Diego, Economics Working Paper Series
qt6th0060j, Department of Economics, UC San Diego.
- Bull, Jesse & Watson, Joel, 2002. "Evidence Disclosure and Verfiability," University of California at San Diego, Economics Working Paper Series qt19p7z2gm, Department of Economics, UC San Diego.
- Steven Shavell, 1979. "Risk Sharing and Incentives in the Principal and Agent Relationship," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 55-73, Spring.
- Jean-Jacques Laffont & David Martimort, 1997.
"The Firm as a Multicontract Organization,"
Journal of Economics & Management Strategy,
Wiley Blackwell, vol. 6(2), pages 201-234, 06.
- 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.
- Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, March.
- David Martimort, 1999. "The Life Cycle of Regulatory Agencies: Dynamic Capture and Transaction Costs," Review of Economic Studies, Oxford University Press, vol. 66(4), pages 929-947.
- Bengt Holmstrom, 1979.
"Moral Hazard and Observability,"
Bell Journal of Economics,
The RAND Corporation, vol. 10(1), pages 74-91, Spring.
- Baliga, Sandeep, 1999. "Monitoring and Collusion with "Soft" Information," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(2), pages 434-40, July.
When requesting a correction, please mention this item's handle: RePEc:bpj:bejtec:v:contributions.2:y:2003:i:1:n:5. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Golla)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.