Two types of collusion in a model of hierarchical agency

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Baç, Mehmet and Küçükşenel, Serkan (2006) Two types of collusion in a model of hierarchical agency. Journal of institutional and theoretical economics, 162 (2). pp. 262-276. ISSN 0932-4569

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Official URL: http://dx.doi.org/10.1628/093245606777583585


The standard ex post type of collusion is a supervisor-agent agreement to misrepresent the outcome of supervision. Under ex ante collusion the agent makes a side transfer to the supervisor, who, in return, stops monitoring the agent's productivity. Extending Tirole's [1986] model of hierarchy to include ex ante collusion and supervision costs, we show that the principal can ignore ex ante collusion and the supervisor's incentive constraint if supervision technology is likely to generate information at a low cost. To prevent ex ante collusion the principal increases the difference between the wages paid when the supervisor's report is empty and when it contains productivity evidence.

Item Type:Article
Subjects:H Social Sciences > HB Economic Theory
ID Code:259
Deposited By:Mehmet Baç
Deposited On:19 Dec 2006 02:00
Last Modified:17 Sep 2019 14:39

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