Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/185770
Authors: 
Pollrich, Martin
von Negenborn, Colin
Year of Publication: 
2018
Series/Report no.: 
Discussion Paper No. 100
Abstract: 
This paper shows that the possibility of collusion between an agent and a supervisor imposes no restrictions on the set of implementable social choice functions (SCF) and associated payoff vectors. Any SCF and any payoff profile that are implementable if the supervisor′s information was public is also implementable when this information is private and collusion is possible. To implement a given SCF we propose a one-sided mechanism that endogenously creates private information for the supervisor vis-à-vis the agent, and conditions both players′ payoffs on this endogenous information. We show that in such a mechanism all collusive side-bargaining fails, similar to the trade failure in Akerlof′s (1970) car market and in models of bilateral trade.
Subjects: 
mechanism design
collusion
asymmetric information
correlation
JEL: 
D82
D83
L51
Document Type: 
Working Paper

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