Collusion and the Organization of the Firm
American Economic Journal: Microeconomics
vol. 7,
no. 3, August 2015
(pp. 54-84)
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 with no monitoring, or working within the firm with monitoring. In equilibrium, there are no rents due to collusion and the efficient worker works outside the firm. The results are robust to a number of extensions. (JEL D21, D43, D82, D86, L12, L13)Citation
Burlando, Alfredo, and Alberto Motta. 2015. "Collusion and the Organization of the Firm." American Economic Journal: Microeconomics, 7 (3): 54-84. DOI: 10.1257/mic.20130067Additional Materials
JEL Classification
- D21 Firm Behavior: Theory
- D43 Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection
- D82 Asymmetric and Private Information; Mechanism Design
- D86 Economics of Contract: Theory
- L12 Monopoly; Monopolization Strategies
- L13 Oligopoly and Other Imperfect Markets
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