Consulting collusive experts

Dilip Mookherjee, Alberto Motta, Masatoshi Tsumagari

Research output: Contribution to journalArticlepeer-review

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.

Original languageEnglish
Pages (from-to)290-317
Number of pages28
JournalGames and Economic Behavior
Volume122
DOIs
Publication statusPublished - 2020 Jul

Keywords

  • Collusion
  • Delegation
  • Expert
  • Mechanism design

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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