Collusion and the Organisation of the Firm

34 Pages Posted: 18 Oct 2012 Last revised: 24 Feb 2014

Alfredo Burlando

University of Oregon - Department of Economics

Alberto Motta

UNSW Australia Business School, School of Economics

Date Written: January 1, 2014

Abstract

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.

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

JEL Classification: D82, C72, D23

Suggested Citation

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

Alfredo Burlando

University of Oregon - Department of Economics ( email )

Eugene, OR 97403
United States

Alberto Motta (Contact Author)

UNSW Australia Business School, School of Economics ( email )

High Street
Sydney, NSW 2052
Australia

HOME PAGE: http://https://sites.google.com/site/albertomottaeconomics/

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