Collusion, Shading, and Optimal Organization Design in a Three-tier Agency Model with a Continuum of Types

Yutaka Suzuki ()
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Yutaka Suzuki: Faculty of Economics, Hosei University

Annals of Economics and Finance, 2021, vol. 22, issue 2, 317-365

Abstract: We apply the First-Order Approach and Monotone Comparative Statics to the continuous-type, three-tier agency model with hidden information and collusion a la Tirole (1986,1992), characterize the nature of equilibrium contract implemented under the possibility of collusion between supervisor and agent, and obtain a general comparison result on the two-tier vs. three-tier organization structures. We then introduce a behavioral idea, "shading" (Hart and Moore (2008)). By combining the two ideas, collusion and shading, we obtain a new result on the choice of Collusion-proof vs. Equilibrium Collusion regimes, and give a micro foundation to ex-post haggling costs, addressed by Transaction Cost Economics.

Keywords: Collusion; Supervision; Mechanism Design; First Order (Mirrlees) Approach; Behavioral Economics; Shading (search for similar items in EconPapers)
JEL-codes: D82 D86 (search for similar items in EconPapers)
Date: 2021
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