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Consulting collusive experts

Dilip Mookherjee, Alberto Motta and Masatoshi Tsumagari

Games and Economic Behavior, 2020, vol. 122, issue C, 290-317

Abstract: In designing a contract with an agent privately informed about its cost, should a principal consult an expert who has already received a partially informative signal of the agent's cost? The expert has a prior relationship with the agent, facilitating (weak) ex ante collusion which coordinates their participation and reporting decisions with accompanying side-payments. While delegating contracting with the agent to the expert is never profitable, we show that consulting the expert is typically valuable. Changes in bargaining power within the coalition have no effect, while altruism of the expert towards the agent makes the principal worse off.

Keywords: Mechanism design; Collusion; Delegation; Expert (search for similar items in EconPapers)
JEL-codes: D82 D86 L23 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:122:y:2020:i:c:p:290-317

DOI: 10.1016/j.geb.2020.04.011

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