Reciprocal relationships and mechanism design

We study an incomplete information game in which players can coordinate their actions by contracting among themselves. We model this relationship as a reciprocal contracting procedure where each player has the ability to make commitments contingent on the other players' commitments. We differ from the rest of the literature on reciprocal contracting by assuming that punishments cannot be enforced in the event that cooperation breaks down. We fully characterize the outcomes that can be supported as perfect Bayesian equilibrium outcomes in such an environment. We use our characterization to show that the set of supportable outcomes with reciprocal contracting is larger than the set of outcomes available in a centralized mechanism design environment in which the mechanism designer is constrained by his inability to enforce punishments against non‐participants. The difference stems from the players' ability in our contracting game to convey partial information about their types at the time they offer contracts. We discuss the implications of our analysis for modelling collusion between multiple agents interacting with the same principal.     

Total Quality Management in Ghana: Critical Success Factors and Model for Implementation of a Quality Revolution

In this study, the authors aim to identify the critical success factors and challenges of total quality management (TQM) implementation and propose a model for the successful implementation of a quality revolution in Ghana. The approach in this study was to review existing literature followed by case studies of 15 firms. Three employees (quality manager/director and any two “ordinary employees”) were interviewed to identify the critical success factors that would be appropriate for the implementation of a quality revolution in Ghana as well as the main challenges of quality management they face. Findings revealed that top management commitment, empowerment and involvement of employees, resource availability, competition and increased customer awareness, and a well-functioning quality network are the major factors that are critical and essential if any TQM program is to be successful. Three main problems—management resistance, employee resistance, and resource paucity—were identified as principal impediments to TQM programs.     

Mechanism design with collusive supervision

We analyze an adverse selection environment with third party supervision. The supervisor is partly informed of the agent's type. The supervisor and the agent collude while interacting with the principal. Contracting with the agent directly and ignoring the presence of the supervisor constitutes the no-supervision benchmark. We show that delegating to the supervisor reduces the principal's payoff compared to the no-supervision benchmark under a standard condition on the distribution of the agent's types. In contrast, if the principal contracts with both the agent and the supervisor, there exists a mechanism that improves the principal's payoff over the no-supervision payoff.     

On the optimality of nonmaximal fines in the presence of corruptible law enforcers

In this paper, we develop a model of law enforcement with the possibility of corruption between enforcers and potential offenders. We study how the violation rate changes with the level of the fine imposed on violations. We find, in contrast to the conventional wisdom, that the fine level that minimizes violations can be intermediate rather than large. We then study conditions under which different fine levels would be optimal.      

Implementation by Gradual Revelation

We investigate the feasibility of implementing an allocation rule with a gradual‐revelation mechanism in which agents reveal their private information over time (rather than all at once). With independently distributed types, private values, and transferable utilities satisfying a single‐crossing property, an ex‐post monotonicity condition is sufficient for budget‐balanced implementation of any incentive‐compatible allocation rule with any gradual‐revelation scheme. When we extend the single‐crossing property over the set of randomized allocations, a weaker monotonicity condition is necessary and sufficient for budget‐balanced implementation by gradual revelation.     

Aggregate Information and Organizational Structures*

We study information flows in an organization with a top management (principal) and multiple subunits (agents) with private information that determines the organization's overall efficiency. Under centralized communication, eliciting the agents' information may induce the principal to manipulate aggregate information, which obstructs an effective use of information. Under hierarchical communication, the principal concedes more information rent due to loss of control, but is able to use the agents' information more effectively. The trade-off between the organizational structures depends on the likelihood that the agents are efficient. Centralized communication is optimal when such likelihood is low. Hierarchical communication, by contrast, is optimal when it is high.