Two-agent collusion-proof implementation with correlation and arbitrage

Two-agent collusion-proof implementation with correlation and arbitrage This paper characterizes the optimal collusion-proof mechanism in a two-agent nonlinear pricing environment. Our model allows agents to have correlated types and to reallocate their total purchases among themselves. We show that, under strongly negative correlation, the coalition will, sometimes, be torn apart at no cost. Under positive or weakly negative correlations, however, the threat of collusion forces the principal to distort allocation away from the first-best level obtained without collusion. We also show that, in contrast to the result of Laffont and Martimort (Econometrica 68:309–342, 2000), when the correlation is almost perfectly positive, the possibility of arbitrage prevents the principal from approaching the first-best efficiency. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Economic Design Springer Journals

Two-agent collusion-proof implementation with correlation and arbitrage

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Publisher
Springer Berlin Heidelberg
Copyright
Copyright © 2017 by Springer-Verlag GmbH Germany
Subject
Economics; Economics, general; Economic Theory/Quantitative Economics/Mathematical Methods; Game Theory, Economics, Social and Behav. Sciences; Microeconomics; Behavioral/Experimental Economics
ISSN
1434-4742
eISSN
1434-4750
D.O.I.
10.1007/s10058-017-0204-x
Publisher site
See Article on Publisher Site

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