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Preventing Collusion Through Discretion

  • Leonardo Felli

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

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Paper provided by Suntory and Toyota International Centres for Economics and Related Disciplines, LSE in its series STICERD - Theoretical Economics Paper Series with number 303.

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Date of creation: Jan 1996
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Handle: RePEc:cep:stitep:303
Contact details of provider: Web page: http://sticerd.lse.ac.uk/_new/publications/default.asp

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  1. Laffont, J.J. & Martimort, D., 1996. "Collusion Under Asymmetric Information," Papers 95.389, Toulouse - GREMAQ.
  2. Celik, Gorkem, 2009. "Mechanism design with collusive supervision," Journal of Economic Theory, Elsevier, vol. 144(1), pages 69-95, January.
  3. 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.
  4. 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.
  5. Lucia Quesada, 2005. "Collusion as an Informed Principal Problem," Game Theory and Information 0504002, EconWPA.
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