Strong Collusion-Proof Implementation

Jinwoo Kim
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Jinwoo Kim: Seoul National University

Korean Economic Review, 2023, vol. 39, 241-256

Abstract: The robustly collusion-proof (RCP) mechanism proposed by Che and Kim (2006) enables a principal to attain any payoff that could be achieved without any collusion, even when agents collude. Although the RCP mechanism is robust to various collusive arrangements that agents may devise, it relies on agents not to form certain extreme beliefs following a rejection of a collusive side contract. This paper strengthens the collusionproofness notion to be robust to such beliefs, as well as any other aspects of coalition formation and its behavior, and proposes a mechanism that implements virtually any noncollusive payoff for the principal in this considerably strong collusion-proof sense. The key issue is to guarantee the participation of agents in an RCP mechanism. The proposed mechanism achieves this situation by adding an option that each agent can exercise to protect himself against possible hold-up by his collusive partners.

Keywords: Robustly Collusion-proof Implementation; Strongly Collusion-proof Implementation; Virtual Strongly Collusion-proof Implementation (search for similar items in EconPapers)
JEL-codes: D47 D82 (search for similar items in EconPapers)
Date: 2023
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