Friendships in Vertical Relations - (Now published under the title 'Renegotiation and Collusion in Organisations', in 'Journal of Economics and Management Strategy', 9(4)(Winter 2001), pp.453-483.)

Leonardo Felli and J. Miguel Villas-Boas

STICERD - Theoretical Economics Paper Series from Suntory and Toyota International Centres for Economics and Related Disciplines, LSE

Abstract: It has been argued that collusion among the members of an organization or a vertical structure creates efficiency losses, and hence should be prevented. This paper shows that whenever collusion takes the form of co-insurance agreements, here called ?friendships?, among the members of a vertical structure this may not be the case. Indeed, in such a case, collusion yields only a redistribution of surplus among the members of the vertical structure. Hence, its efficiency costs may be reduced by allowing these ?friendships? to take place, rather than preventing them, and accounting for the redistribution in the design of the optimal incentive scheme.

Date: 1996-09
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
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: https://EconPapers.repec.org/RePEc:cep:stitep:/1996/314

Access Statistics for this paper

More papers in STICERD - Theoretical Economics Paper Series from Suntory and Toyota International Centres for Economics and Related Disciplines, LSE
Bibliographic data for series maintained by ().