Decentralization and Collusion

Sandeep Baliga*, Tomas Sjöström

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

63 Scopus citations

Abstract

We consider a model where agents work in sequence on a project, share information not available to the principal, and can collude. Due to limited liability the Coase theorem does not apply. The distribution of surplus among the agents is therefore an important control variable for the principal, which gives us a theory of how to delegate in an organization subject to moral hazard. The optimal distribution of surplus can always be achieved by delegating in the right way (decentralization) without using "message games."Journal of Economic LiteratureClassification Numbers: D23, D82, L14, L22.

Original languageEnglish (US)
Pages (from-to)196-232
Number of pages37
JournalJournal of Economic Theory
Volume83
Issue number2
DOIs
StatePublished - Dec 1998

ASJC Scopus subject areas

  • Economics and Econometrics

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