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Preventing Collusion Through Discretion

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  • Leonardo Felli

Abstract

Large public bureaucracies are usually less efficient than modern private corporations. This paper explains how the degree of discretionary power might account for this difference in efficiency. In fact, increasing the discretionary power of the intermediate layers of an organization can enhance productivity by preventing collusion between middle managers and line workers; provided that collusion has a negative effect on the organization's surplus and takes place in conditions of asymmetric information

Suggested Citation

  • Leonardo Felli, 1996. "Preventing Collusion Through Discretion," STICERD - Theoretical Economics Paper Series /1996/303, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  • Handle: RePEc:cep:stitep:/1996/303
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    References listed on IDEAS

    as
    1. Lucia Quesada, 2005. "Collusion as an Informed Principal Problem," Game Theory and Information 0504002, University Library of Munich, Germany.
    2. Faure-Grimaud, Antoine & Martimort, David, 2001. "On some agency costs of intermediated contracting," Economics Letters, Elsevier, vol. 71(1), pages 75-82, April.
    3. Celik, Gorkem, 2009. "Mechanism design with collusive supervision," Journal of Economic Theory, Elsevier, vol. 144(1), pages 69-95, January.
    4. Jean-Jacques Laffont & David Martimort, 1997. "Collusion under Asymmetric Information," Econometrica, Econometric Society, vol. 65(4), pages 875-912, July.
    5. Rafael Hortala-Vallve & Miguel Sanchez Villalba, 2010. "Internalizing Team Production Externalities through Delegation: The British Passenger Rail Sector as an Example," Economica, London School of Economics and Political Science, vol. 77(308), pages 785-792, October.
    6. Faure-Grimaud, Antoine & Laffont, Jean-Jacques & Martimort, David, 1999. "The endogenous transaction costs of delegated auditing," European Economic Review, Elsevier, vol. 43(4-6), pages 1039-1048, April.
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    Citations

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    Cited by:

    1. Axel Gautier & Dimitri Paolini, 2007. "Delegation and Information Revelation," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 163(4), pages 574-597, December.
    2. Mehmet Barlo & Ayça Özdoğan, 2013. "The Optimality of Team Contracts," Games, MDPI, Open Access Journal, vol. 4(4), pages 1-20, November.
    3. Walter Novaes & Luigi Zingales, 2004. "Bureaucracy as a Mechanism to Generate Information," RAND Journal of Economics, The RAND Corporation, vol. 35(2), pages 245-259, Summer.
    4. Barlo, Mehmet & Ayca, Ozdogan, 2012. "Team beats collusion," MPRA Paper 37449, University Library of Munich, Germany.
    5. Rafael Hortala-Vallve & Miguel Sanchez Villalba, 2010. "Internalizing Team Production Externalities through Delegation: The British Passenger Rail Sector as an Example," Economica, London School of Economics and Political Science, vol. 77(308), pages 785-792, October.
    6. Howitt, Peter & Aghion, Philippe, 1997. "Ajustement macroéconomique aux technologies multi-usages," L'Actualité Economique, Société Canadienne de Science Economique, vol. 73(4), pages 575-593, décembre.

    More about this item

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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