Sweet Lemons: Mitigating Collusion in Organizations

Martin Pollrich and Colin von Negenborn

No 100, Rationality and Competition Discussion Paper Series from CRC TRR 190 Rationality and Competition

Abstract: This paper shows that the possibility of collusion between an agent and a supervisor imposes no restrictions on the set of implementable social choice functions (SCF) and associated payoff vectors. Any SCF and any payoff profile that are implementable if the supervisor′s information was public is also implementable when this information is private and collusion is possible. To implement a given SCF we propose a one-sided mechanism that endogenously creates private information for the supervisor vis-à-vis the agent, and conditions both players′ payoffs on this endogenous information. We show that in such a mechanism all collusive side-bargaining fails, similar to the trade failure in Akerlof′s (1970) car market and in models of bilateral trade.

Keywords: mechanism design; collusion; asymmetric information; correlation (search for similar items in EconPapers)
JEL-codes: D82 D83 L51 (search for similar items in EconPapers)
Date: 2018-06-07
New Economics Papers: this item is included in nep-des, nep-gth and nep-mic
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Related works:
Journal Article: Sweet lemons: Mitigating collusion in organizations (2020)
Working Paper: Sweet Lemons: Mitigating Collusion in Organizations (2020)
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