Collusion and the organization of delegated expertise

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Publication Details

Output type: Journal article

Author list: Gromb D, Martimort D

Publisher: Elsevier

Publication year: 2007

Journal: Journal of Economic Theory (0022-0531)

Volume number: 137

Issue number: 1

Start page: 271

End page: 299

Number of pages: 29

ISSN: 0022-0531

eISSN: 1095-7235

Languages: English-Great Britain (EN-GB)

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Open access status: closed

Abstract

We study the optimal design of incentive contracts for experts in different collusion environments, and explore implications for the organization of delegated expertise. We consider a principal relying on experts to gather and report two signals about a project's value. The principal can have a single expert gather both signals or two experts gather one signal each. We show that absent collusion, the multiexpert organization dominates the single expert organization. However, this ranking is reversed when the experts can collude among themselves (horizontal collusion) and with the principal (vertical collusion). (c) 2007 Elsevier Inc. All rights reserved.

Keywords

collusion, expertise, organization

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