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Collusion and Outcome Equivalency

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  • Dongsoo Shin

Abstract

This paper considers a principal-agent model with adverse selection, in which collusion among the agents is possible. We compare the optimal outcome in two cases: (i) the principal can perfectly discriminate the transfers to the agents, and (ii) the principal's power to discriminate the transfers to the agents is limited. We find that the principal's payoff is not affected by limitation on transfer discrimination.

Suggested Citation

  • Dongsoo Shin, 2008. "Collusion and Outcome Equivalency," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 164(3), pages 449-459, September.
    • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200809)164:3_449:caoe_2.0.tx_2-d
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    References listed on IDEAS

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    1. Martimort, David, 1997. " A Theory of Bureaucratization Based on Reciprocity and Collusive Behavior," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(4), pages 555-579, December.
    2. David Martimort, 1997. "A Theory of Bureaucratization Based on Reciprocity and Collusive Behavior," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(4), pages 555-579, December.
    3. Jean-Jacques Laffont & David Martimort, 1997. "Collusion under Asymmetric Information," Econometrica, Econometric Society, vol. 65(4), pages 875-912, July.
    4. Mookherjee, Dilip & Reichelstein, Stefan, 1992. "Dominant strategy implementation of Bayesian incentive compatible allocation rules," Journal of Economic Theory, Elsevier, vol. 56(2), pages 378-399, April.
    5. Jacques Lawarrée & Dongsoo Shin, 2005. "Organizational Flexibility and Cooperative Task Allocation among Agents," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 161(4), pages 621-635, December.
    6. Dongsoo Shin, 2007. "Contracts under Wage Compression: A Case of Beneficial Collusion," Southern Economic Journal, John Wiley & Sons, vol. 74(1), pages 143-157, July.
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    More about this item

    JEL classification:

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

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