Three and a Half Theoretical Essays on Collusion

I explore a variety of economic issues related to collusion. Three chapters focus on exploring how design desiderata that emerge from a concern about collusion affect the games a principal might construct. Chapter 2 studies how a revenue-maximizing principal should design her single-good auction when bidders may collude and she does not have a reliable model of how exactly they may collude. I identify auction designs that maximize the principal’s worst-case revenue, where the worst case is taken over all forms of behavior the principal considers possible. Chapter 3 studies how a principal motivating a team of workers to exert effort should design a contract in order to ensure that the resulting game between the workers has a unique equilibrium. I explore how different notions of equilibrium lead or do not lead to different restrictions on the resulting contract. In Chapter 5, the possibility of collusion motivates a principal to design a game so that all equilibria result in her desired outcome. I show that it is actually impossible for the principal to design a binary action game that achieves this goal in particular settings. Finally, Chapter 4 studies a market research firm which jointly advises all downstream producers on demand conditions; whether such firms enable collusion among the downstream producers has been debated by policy-makers and researchers. I identify conditions under which the market research firm chooses information policies that maximize social and consumer surplus.