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Collusion and the Organisation of the Firm

Alfredo Burlando

University of Oregon - Department of Economics

Alberto Motta

University of New South Wales

January 1, 2014

This paper shows that the threat of collusion between a productive agent and the auditor in charge of monitoring production can influence a number of organizational dimensions of the firm, including outsourcing decisions and the allocation of production costs. We find that the optimal organizational response to internal collusion lets the agent choose between working outside the firm (no monitoring and full claims over production costs) or within the firm (monitoring but no claims over costs). In equilibrium, there are no rents due to collusion. The results are robust to a number of extensions.

Number of Pages in PDF File: 34

Keywords: Collusion, Supervision, Mechanism design, Theory of the Firm, Outsourcing

JEL Classification: D82, C72, D23

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Date posted: October 18, 2012 ; Last revised: February 24, 2014

Suggested Citation

Burlando, Alfredo and Motta, Alberto, Collusion and the Organisation of the Firm (January 1, 2014). Available at SSRN: http://ssrn.com/abstract=2163842 or http://dx.doi.org/10.2139/ssrn.2163842

Contact Information

Alfredo Burlando
University of Oregon - Department of Economics ( email )
Eugene, OR 97403
United States
Alberto Motta (Contact Author)
University of New South Wales ( email )
High Street
Sydney, NSW 2052
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References:  4
Footnotes:  39

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