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Consulting collusive experts

Author

Listed:
  • Mookherjee, Dilip
  • Motta, Alberto
  • Tsumagari, Masatoshi

Abstract

In designing a contract with an agent privately informed about its cost, should a principal consult an expert who has already received a partially informative signal of the agent's cost? The expert has a prior relationship with the agent, facilitating (weak) ex ante collusion which coordinates their participation and reporting decisions with accompanying side-payments. While delegating contracting with the agent to the expert is never profitable, we show that consulting the expert is typically valuable. Changes in bargaining power within the coalition have no effect, while altruism of the expert towards the agent makes the principal worse off.

Suggested Citation

  • Mookherjee, Dilip & Motta, Alberto & Tsumagari, Masatoshi, 2020. "Consulting collusive experts," Games and Economic Behavior, Elsevier, vol. 122(C), pages 290-317.
    • Handle: RePEc:eee:gamebe:v:122:y:2020:i:c:p:290-317
    DOI: 10.1016/j.geb.2020.04.011
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    References listed on IDEAS

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    Cited by:

    1. Alexander Henke & Fahad Khalil & Jacques Lawarree, 2022. "Honest agents in a corrupt equilibrium," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 31(3), pages 762-783, August.
    2. Mookherjee, Dilip & Tsumagari, Masatoshi, 2023. "Regulatory mechanism design with extortionary collusion," Journal of Economic Theory, Elsevier, vol. 208(C).

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    More about this item

    Keywords

    Mechanism design; Collusion; Delegation; Expert;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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