Two Types of Collusion in a Model of Hierarchical Agency
Year: 2006
Type: article
Abstract: The standard ex post type of collusion is a supervisor-agent agreement to misrepresent the outcome of supervision. Under ex ante collusion the agent makes a side transfer to the supervisor, who, in return, stops monitoring the agents productivity. Extending Tiroles [1986] model of hierarchy to include ex ante collusion and supervision costs, we show that the principal can ignore ex ante collusion and the supervisors incentive constraint if supervision technology is likely to generate information at a low cost. To prevent ex ante collusion the principal increases the difference between the wages paid when the supervisors report is empty and when it contains productivity evidence.
Authors: Mehmet Bac, Serkan Kucuksenel
Language: English
Field: Decision Sciences
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W1540940640