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Mechanism design with collusive supervision: a three-tier agency model with a continuum of types

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Listed:
  • Yutaka Suzuki

    (Faculty of Economics, Hosei University)

Abstract

We apply the "Monotone Comparative Statics" method ala Topkis (1978), Edlin and Shannon (1998), and Milgrom and Segal (2002)'s generalized envelope theorem to the three-tier agency model with hidden information and collusion ala Tirole (1986, 1992), thereby provide a framework that can address the issues treated in the existing literature, e.g., Kofman and Lawarree (1993)''s auditing application, in a much simpler fashion. In addition to such a technical contribution, the paper derives some clear and robust implication applicable to corporate governance reform (Propositions 1 (2) and 3).

Suggested Citation

  • Yutaka Suzuki, 2008. "Mechanism design with collusive supervision: a three-tier agency model with a continuum of types," Economics Bulletin, AccessEcon, vol. 4(12), pages 1-10.
    • Handle: RePEc:ebl:ecbull:eb-08d80022
    as

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    References listed on IDEAS

    as
    1. Paul Milgrom & Ilya Segal, 2002. "Envelope Theorems for Arbitrary Choice Sets," Econometrica, Econometric Society, vol. 70(2), pages 583-601, March.
    2. Jean-Jacques Laffont & Jean Tirole, 1991. "The Politics of Government Decision-Making: A Theory of Regulatory Capture," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(4), pages 1089-1127.
    3. Patrick Bolton & Mathias Dewatripont, 2005. "Contract Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262025760, December.
    4. Edlin, Aaron S. & Shannon, Chris, 1998. "Strict Monotonicity in Comparative Statics," Journal of Economic Theory, Elsevier, vol. 81(1), pages 201-219, July.
    5. J. A. Mirrlees, 1971. "An Exploration in the Theory of Optimum Income Taxation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 38(2), pages 175-208.
    6. Kofman, Fred & Lawarree, Jacques, 1993. "Collusion in Hierarchical Agency," Econometrica, Econometric Society, vol. 61(3), pages 629-656, May.
    7. Tirole, Jean, 1986. "Hierarchies and Bureaucracies: On the Role of Collusion in Organizations," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 2(2), pages 181-214, Fall.
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    Cited by:

    1. Yutaka Suzuki, 2013. "Hierarchical Global Pollution Control in Asymmetric Information Environments: A Continuous-type, Three-tier Agency Framework," Working Papers e065, Tokyo Center for Economic Research.
    2. Yutaka Suzuki, 2021. "Collusion, Shading, and Optimal Organization Design in a Three-tier Agency Model with a Continuum of Types," Annals of Economics and Finance, Society for AEF, vol. 22(2), pages 317-365, November.

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    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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