Collusion and Renegotiation in a Principal-Supervisor-Agent Relationship

Roland Strausz ()

No 48, Discussion Paper from Tilburg University, Center for Economic Research

Abstract: This paper describes a principal-agent relationship with a supervisor who has information about the agent. The agent and the supervisor have the possibility to collude and misinform the principal. From the literature we know that there exists an optimal contract which excludes collusion in equilibrium. The optimal contract, however, is ex post inefficient and creates scope for renegotiation. If renegotiation is allowed then under some parameter constellations the optimal contract is a contract which necessarily induces collusion. The paper thus shows that the principal's behavior toward ex post inefficiencies may determine whether collusion occurs in equilibrium.

Keywords: Collusion (search for similar items in EconPapers)
Date: 1995
View list of references View citations in EconPapers

Downloads: (external link)
http://arno.uvt.nl/show.cgi?fid=3120 (application/pdf)
http://arno.uvt.nl/show.cgi?fid=3121 (application/postscript)

Related works:
Journal Article: Collusion and Renegotiation in a Principal-Supervisor-Agent Relationship (1997)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:dgr:kubcen:199548

Access Statistics for this paper

More papers in Discussion Paper from Tilburg University, Center for Economic Research
Series data maintained by Corry Stuyts ().