Divide and Conquer

Zhijun Chen ()

Labor and Demography from EconWPA

Abstract: Tournaments are well known to be vulnerable to collusion as shown by the impossibility theorem in Ishiguro (2004), which asserts that efficient effort levels are impossible to be implemented through a collusion-proof contract. However, we argue that this impossibility is a product of simple mechanisms that prevail in collusion-proof mechanism design. In this paper, we explore more sophisticated mechanisms with discrimination and asymmetric information to prevent collusion, outlining the principle of “divide and conquer”. As a result, we establish a possibility theorem of implementing efficient effort levels, and thus break down the impossibility theorem in Ishiguro (2004).

Keywords: Collusion; Discrimination; Moral Hazard; Tournament Model (search for similar items in EconPapers)
JEL-codes: D20 J30 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mic
Date: 2005-04-28
Note: Type of Document - pdf; pages: 21
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpla:0504012

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