Optimal Influence Sale

Seung Han Yoo

No 2002, Discussion Paper Series from Institute of Economic Research, Korea University

Abstract: A principal sells an influence to firms that may undertake a project, through collusion with a seller of some item. For the optimal sale of influence, the principal chooses an influence level for a losing firm above the default level, while treating a winning firm even more favorably. Furthermore, the difference in influence between two firms does not change monotonically, and under some parameters, even the set of firm types participating in the sale is larger. The optimal mechanism highlights the cashing-out process of public resources by the principal, which comes at the cost of public welfare.

Keywords: Sale of influence; collusion; optimal mechanism (search for similar items in EconPapers)
JEL-codes: C73 D82 (search for similar items in EconPapers)
Date: 2020
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