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Fighting Collusion in Tournaments

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  • Chen, Zhijun

Abstract

This paper proposes a new approach of fighting collusion in tournaments which sheds light on the principle of divide and conquer: the principal can benefit from manipulating information revelation, by which he brings asymmetric information between the agents and thus creates a distortion of efficiency in the coalition. We employ a simple tournament setting where, due to perfect collusion, the efficient effort levels are impossible to be implemented through simple mechanisms. We propose a sophisticated mechanism with a biased promotion rule that allows the principal to manipulate the revelation of information and make asymmetric information between the agents, which brings trade-offs between rent-extraction and distortion of efficiency into the coalition. We show that, it is possible to implement efficient effort levels under the sophisticated mechanism. JEL Classification: C72, D82

Suggested Citation

  • Chen, Zhijun, 2006. "Fighting Collusion in Tournaments," MPRA Paper 872, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:872
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    References listed on IDEAS

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    1. Lazear, Edward P & Rosen, Sherwin, 1981. "Rank-Order Tournaments as Optimum Labor Contracts," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 841-864, October.
    2. Zhijun Chen, 2005. "Divide and Conquer," Labor and Demography 0504012, University Library of Munich, Germany.
    3. Green, Jerry R & Stokey, Nancy L, 1983. "A Comparison of Tournaments and Contracts," Journal of Political Economy, University of Chicago Press, vol. 91(3), pages 349-364, June.
    4. Jean-Jacques Laffont & David Martimort, 1997. "Collusion under Asymmetric Information," Econometrica, Econometric Society, vol. 65(4), pages 875-912, July.
    5. Jean-Jacques Laffont & David Martimort, 2000. "Mechanism Design with Collusion and Correlation," Econometrica, Econometric Society, vol. 68(2), pages 309-342, March.
    6. Myerson, Roger B., 1982. "Optimal coordination mechanisms in generalized principal-agent problems," Journal of Mathematical Economics, Elsevier, vol. 10(1), pages 67-81, June.
    7. Ishiguro, Shingo, 2004. "Collusion and discrimination in organizations," Journal of Economic Theory, Elsevier, vol. 116(2), pages 357-369, June.
    8. Chen, Zhijun, 2006. "Private Enforcement against Collusion in Mechanism Design," MPRA Paper 873, University Library of Munich, Germany.
    9. Itoh Hideshi, 1993. "Coalitions, Incentives, and Risk Sharing," Journal of Economic Theory, Elsevier, vol. 60(2), pages 410-427, August.
    10. Tirole, Jean, 1986. "Hierarchies and Bureaucracies: On the Role of Collusion in Organizations," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 2(2), pages 181-214, Fall.
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    Cited by:

    1. Ottone, Stefania & Ponzano, Ferruccio, 2010. "Competition and cooperation in markets. The experimental case of a winner-take-all setting," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 39(2), pages 163-170, April.
    2. Oliver Gürtler, 2010. "Collusion in homogeneous and heterogeneous tournaments," Journal of Economics, Springer, vol. 100(3), pages 265-280, July.
    3. Kräkel, Matthias & Schöttner, Anja, 2010. "Technology choice, relative performance pay, and worker heterogeneity," Journal of Economic Behavior & Organization, Elsevier, vol. 76(3), pages 748-758, December.
    4. Kräkel, Matthias & Schöttner, Anja, 2010. "Technology Choice and Incentives under Relative Performance Schemes," Bonn Econ Discussion Papers 10/2010, University of Bonn, Bonn Graduate School of Economics (BGSE).

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    More about this item

    Keywords

    collusion; tournament;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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