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Mechanism design with tacit collusion

Abdulkadiroglu, Atila; Chung, Kim-Sau

In the mechanism design literature, collusion is often modelled as agents signing side contracts. This modelling approach is in turn implicitly justified by some unspecified repeated-interaction story. In this paper, we first second-guess what kind of repeated-interaction story these side-contract theorists (would admit that they) are having in mind. We then show that, within this repeated-interaction story, there is a big difference between communicative and tacit collusion. While communicative collusion hurts the mechanism designer, tacit collusion is exploitable.

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Academic Units
Economics
Publisher
Department of Economics, Columbia University
Series
Department of Economics Discussion Papers, 0102-68
Published Here
March 23, 2011

Notes

July 2002