Possibility Of Collusion Research Articles

Sustainability of Product Market Collusion Under Credit Market Imperfections

We study the implications of credit constraints for the sustainability of product market collusion in a bank-financed oligopoly in which firms face an imperfect credit market. We consider two situations, without and with credit rationing, i.e., with a binding credit limit. When there is credit rationing, a moderately higher cost of external financing may affect the degree of collusion, but a substantial increase keeps it unaffected relative to the no-constraint case. A permanent adverse demand shock in this setup does not affect the possibility of collusion, but may aggravate financing constraints and eventually lead to collusion. We consider both Cournot and Bertrand models, and the results are qualitatively the same.

Managerial Collusive Behavior under Asymmetric Incentive Schemes

AbstractWe analyze the effects of asymmetry in incentive contracts on the possibility of collusion between managers. When their compensation is based on the relative performance evaluation contracts, managers can achieve better outcomes by colluding. Using the concept of balanced temptation introduced by

Sistem Pendukung Keputusan Pemberian Kredit Rumah Sejahtera Pada Nasabah Bank Pembangunan Daerah Kalimantan Timur dengan Metode TOPSIS

One of the most basic of human needs is the house as a place to live and settle. To be able to have a house requires a considerable cost. Therefore, we need a party as an intermediary to ease of payment to purchase of the house. The intermediary in this case is Bank. In this study, the Regional Development Bank (BPD) in East Kalimantan into a bank that was taken as a reference to obtain a loan writers Mortgage Prosperity. During this time , the decision making is done by the analysis of credit (account officer) , always has a lot of obstacles, such as the decision-making process is not effective (use of longer periods of time , effort and money is wasted) , human error and the possibility of collusion between customers and officers of the Bank. Web-based system is built so that users can easily access the system anytime and anywhere. Provision of decision support systems Prosperous Home Lending (KRS) for customers of Regional Development Bank (BPD) in East Kalimantan with Technique For Others Reference by Similarity to Ideal Solution (TOPSIS) methods as a determinant of final calculation from value of available alternatives. TOPSIS is not only consider the closest distance to the ideal solution, but also takes into account the distance to the farthest negative ideal solution to determine the selected alternative. Result from this study is an application decision support facilitate decision-making to facilitate decision-making releated to the problem of determining the recipient of a prosperous home loans in BPD Kaltim, so it can provide decision analysts credit home loans prosperous and appropriately based systems. Keyword s : Decision Support System; Prosperous Home Lending Development; Topsis Method

Nothing is for Free: Security in Searching Shared and Encrypted Data

Most existing symmetric searchable encryption schemes aim at allowing a user to outsource her encrypted data to a cloud server and delegate the latter to search on her behalf. These schemes do not qualify as a secure and scalable solution for the multiparty setting, where users outsource their encrypted data to a cloud server and selectively authorize each other to search. Due to the possibility that the cloud server may collude with some malicious users, it is a challenge to have a secure and scalable multiparty searchable encryption (MPSE) scheme. This is shown by our analysis on the Popa-Zeldovich scheme, which says that an honest user may leak all her search patterns even if she shares only one of her documents with another malicious user. Based on our analysis, we present a new security model for MPSE by considering the worst case and average-case scenarios, which capture different server-user collusion possibilities. We then propose a MPSE scheme by employing the bilinear property of Type-3 pairings and prove its security based on the bilinear Diffie-Hellman variant and symmetric external Diffie-Hellman assumptions in the random oracle model.

Are Interest Rate Fixings Fixed? An Analysis of Libor and Euribor

The London Interbank Offered Rate (Libor) and the Euro Interbank Offered Rate (Euribor) are two key market benchmark interest rates used in a plethora of financial contracts with notional amounts running into the hundreds of trillions of dollars. The integrity of the rate-setting process for these benchmarks has been under intense scrutiny ever since the first reports of attempts to manipulate these rates surfaced in 2007. In this paper, we analyze Libor and Euribor rate submissions by the individual panel banks and shed light on the underlying manipulation potential, by quantifying their effects on the final rate set (the "fixing"). We explicitly take into account the possibility of collusion between several market participants. Our setup allows us to quantify such effects for the actual rate-setting process that is in place at present, and compare it to several alternative rate-setting procedures. We find that such alternative rate fixings, particularly methodologies that eliminate outliers based on the median of submitted rates and the time-series of past submissions, could significantly reduce the effect of manipulation. Furthermore, we discuss the role of the sample size and the particular questions asked of the panel banks, which are different for Libor and Euribor, and examine the need for a transactions database to validate individual submissions.

IT for Corruption Suppression

Government agencies and large corporations meet similar problems related to control of agents dealing with outsiders: citizens under audit of the agency or clients of the company. In such interaction there typically exists a possibility of collusion. In order to prevent it, agencies and corporations usually organize hierarchical controlling structures. The present paper considers game- theoretic models of such structures and studies a problem of their optimal organization.

The Organization of Expertise in the Presence of Communication

A decision-maker has to elicit information from multiple informed experts about a policy's value. The principal may prevent communication among agents. However, it may be in the principal's interest to allow communication among them. I assume that communication allows some synergies among experts to emerge but also opens the possibility of collusion among them. I study the optimal design of contracts focusing on the organization of expertise in the communication phase. I show that, from principal's point of view, when the advantages of the synergy's effects prevail over the collusion problem, communication dominates no communication. However, this will be always true, when the principal allows agents to communicate with each other before they make their effort choices instead of after.

How should commodities be taxed? A supergame-theoretic analysis

This paper studies the impact of commodity taxes on the sustainability of collusion in imperfectly competitive markets. We consider both a Cournot and a Bertrand supergame with discounting, with collusion being supported by either grim trigger strategies or stick-and-carrot optimal punishments. We show that, irrespective of firms' choice variable, and under both punishment schemes, increased reliance on ad valorem taxation makes it easier for firms to sustain a collusive agreement. Contrary to the conventional wisdom according to which ad valorem taxation should be preferred on welfare grounds, we find that welfare under specific taxation might be higher than welfare under ad valorem taxation. The main conclusion of our analysis is that traditional welfare results on the comparison between ad valorem and specific taxation based on static models do not necessarily survive in a dynamic setting where the possibility of collusion among firms is taken into account. In response to an increase in the ad valorem tax rate, sufficiently patient firms might find it rational to form an implicit cartel, which would not have existed otherwise.

Monitoring the Monitors: The Effect of Banking Industry Reform on Earnings Management Behavior in an Emerging Market

AbstractManuscript TypeEmpiricalResearch Question/IssueThis paper studies whether enhanced regulatory supervision of the banking system strengthens the debt contracting mechanism between borrowers and lenders in emerging markets. Specifically, we investigate: 1) whether the borrowers’ accrual‐based earnings management behavior is more negatively associated with the magnitude of their bank loans after the government strengthens the monitoring on banks, and 2) whether the enhanced supervision is more effective for firms controlled by the state, the major economic player in most emerging markets.Research Findings/InsightsUsing China's 2003 banking reform as a natural experiment, we find that borrowers’ earnings management behavior becomes more negatively associated with loan size after the reform. The association is more significant for state‐owned borrowers and lenders, consistent with the prediction that although the state‐owned parties face lower barriers to collusion, the reform increases the costs of side‐contracting. Overall, the findings suggest that such reform is effective in enhancing banks’ role in corporate governance in a transition economy.Theoretical/Academic ImplicationsTo date, most corporate governance studies are based on the standard principal‐agent theory that analyzes contracting between only two parties. For this reason, the standard agency theory has had limited success in explaining economic developments in emerging markets, where the economy is characterized by high levels of government intervention (i.e., a third party), which creates the possibility of collusion. We study debt contracting in an emerging market by adopting the theory of collusion, an extension of the traditional principal‐agent theory to multi‐agent settings, such as one in which there are one principal and two agents, one of whom plays the role of supervisor. Our results show that, consistent with theoretical predictions, monitoring by the government (i.e., the principal) of banks (i.e., the supervisor) has an impact on the relationship between banks and borrowing firms (i.e., the agents).Practitioner/Policy ImplicationsPrevious research on corporate governance in emerging markets, which has focused on the disciplining role of the equity holders, has documented that corporate governance is rather weak. As private lending is the most widely used type of financing in emerging markets such as China, this paper takes a different view and shows that private lending has increased its influence on firms’ corporate governance since a banking reform. The results confirm that the debt contracting mechanism between companies and banks has developed since such a reform.

Enhancing identity trust in cryptographic key management systems for dynamic environments

AbstractCryptographic key management (CKM) schemes can be used to support identity management (IM) systems where linking users securely to data objects is important. CKM schemes enforce data security by encrypting data granting access only to authorized users and security compromises are prevented by updating any keys that are held by users from whom access rights have been revoked. Handling key updates efficiently and providing security against collusion attacks is challenging in dynamic environments like the Internet where manual Security management increases the likelihood of delayed responses. Delay increases the system's vulnerability to security attacks and the potential of the system's violating its service level agreements. Adaptive CKM has emerged as a possibility of addressing this problem but needs to be designed in a way that justifies the cost/benefit tradeoff. In this paper, we show that the key update and collusion avoidance problems are NP‐complete and need heuristic algorithms to prevent performance degradations in comparison to standard CKM schemes. As an example of the benefits of a good heuristic, we present a collusion detection and resolution algorithm whose running time is polynomial in the number of keys. The algorithm operates by mapping the generated key set onto a key graph whose independent set is computed. In the key graph, the vertices represent the keys and the edges the probability that their endpoints can be combined to provoke a collusion attack. Collusion possibilities are resolved by applying a heuristic that resets the probability to zero. The performance of our algorithm is analyzed in comparison to the Akl and Taylor scheme that is secure against collusion attack, and the experimental results indicate that collusion prevention can be done dynamically without affecting performance. Copyright © 2010 John Wiley & Sons, Ltd.

Maritime Threat Perceptions: Non-State Actors in the Indian Ocean Region

After the Cold War, the major threat to peace in the maritime sphere emanates from non-state armed groups, especially in the Indian Ocean Region (IOR). The region does not have any major maritime power amongst its littorals, but is home to most of the troubled spots of the globe and many non-state actors with significant maritime capabilities. The two major ways in which the non-state actors could jeopardise the peace in the region is by maritime terrorism and maritime piracy. There is a thin line dividing the two, primarily based on motives, but there is always a possibility of collusion between them, wherein piracy could be used as a means to give effect to an act of terrorism. The IOR accounts for most of the cases of piracy reported in the world. In the past this region has also witnessed acts of maritime terrorism by non-state outfits like Al Qaeda, Lashkar-e-Taiba and Liberation Tigers of Tamil Eelam. Their ability to harness the maritime medium to launch audacious terror attacks in the littorals has been amply demonstrated in Mumbai in November 2008. This paper discusses the various maritime threats posed by non-state actors in the IOR and brings out the need for cooperative maritime engagement amongst the maritime forces of the littoral states.

The length of contracts and collusion

Many commodities (including energy, agricultural products and metals) are sold both on spot markets and through long-term contracts which commit the parties to exchange the commodity in each of a number of spot market periods. This paper shows how the length of contracts affects the possibility of collusion in a repeated price-setting game. Contracts can both help and hinder collusion, because they reduce the size of the spot market, cutting both the immediate gain from defection and the punishment for deviation. Firms can always sustain some collusive price above marginal cost if they sell the right number of contracts, of any duration, whatever their discount factor. As the duration of contracts increases, however, collusion becomes harder to sustain.

Preemptive collusion among corruptible law enforcers

This paper considers collusion between a supervisor and an agent within a Principal–Supervisor–Agent model. Other papers consider the possibility of collusion after the supervisor has exerted costly effort to obtain hard (“verifiable”) evidence regarding the agent’s actions, information which, if reported would result in the agent being fined with a certain probability. That is, collusion occurs because the supervisor may accept a bribe in exchange for hiding the information he has obtained. This paper allows the supervisor and the agent to enter into a collusive contract either before or after the supervisor has exerted effort to find verifiable information regarding the agent’s actions. The former type of collusion, which occurs after the supervisor has exerted effort, entails ex-post corruption, while the latter, which occurs before the supervisor has exerted effort, entails preemptive corruption. This paper shows that although raising the supervisor’s reward discourages ex-post corruption, it can simultaneously encourage preemptive corruption. Hence, raising the supervisor’s reward will not always discourage collusion. This result further implies that though privatizing law enforcement can always be used to eliminate ex-post corruption, it cannot be used to eliminate preemptive corruption. Furthermore, when compared to ex-post collusion, an equilibrium without corruption is always socially preferred. However, when compared to preemptive collusion, an equilibrium without corruption may not always be socially preferred.

The Vulnerability of Auctions to Bidder Collusion*

Previous work has addressed the relative vulnerability of different auction schemes to collusive bidding. The common wisdom is that ascending-bid and second-price auctions are highly susceptible to collusion. We show that the details of ascending-bid and second-price auctions, including bidder registration procedures and procedures for information revelation during the auction, can be designed to completely inhibit, or unintentionally facilitate, certain types of collusion. If auctions are designed without acknowledging the possibility of collusion then the design will ignore key features that impact the potential success of colluding bidders.

Sustaining Collusion in Growing Markets

The impact of demand growth on the collusion possibilities is investigated in a Cournot supergame where market growth may trigger future entry and the collusive agreement is enforced by the most profitable ‘grim trigger strategies’ available. It is shown that even in situations where perfect collusion can be sustained after entry, coping with a potential entrant in a market which is growing over time may completely undermine any pre‐entry collusive plans of the incumbent firms. This is because, before entry, a deviation and the following punishment phase may become more attractive thanks to their additional effect in terms of delaying entry.

Incentives for Auditor Collusion in Pre-Sarbanes-Oxley Regulatory Environment

This paper develops a single-play game theory model that looks at the strategic interactions between auditors and managers. This paper adds to the literature by explicitly modeling the possibility of collusion in a context where the outcome is unverifiable and the manager has the possibility of funding side-payments in such a way that they have little effect on his personal payoff.

Collusion and Organization Design

This paper investigates how the possibility of collusion between members of an organization affects the choice of organizational design. We consider a moral hazard environment in which a principal chooses the organizational structure before designing contracts. The principal has the choice between a principal–agent organization, where it monitors the output produced by the agent itself, and a principal–supervisor–agent hierarchy, where monitoring is delegated. We identify the conditions under which the possibility of collusion in a principal–supervisor–agent hierarchy entails the superiority of a principal–agent organization. The results suggest that the possibility of collusion may set a limit to the size of organizations.

Uncertainty of time intervals and possibility of collusion in infinitely repeated games

We examine relationships between uncertainty of time intervals and possibility of collusion in infinitely repeated games. It is proved that collusion among players is more easily achieved when time intervals are stochastic not deterministic.

Price Regulation of Access to Telecommunications Networks

Abstract Without access of networks to each other, competition in the telecommunications sector would hardly have spread so quickly. Such mutual access is necessary for carriers to provide ubiquitous service and enable endusers to call and be called by anybody without subscribing to a system-wide monopolist. One-way access concerns bottleneck inputs provided by an incumbent network to entrants, while two-way access concerns the interconnection between networks. Whereas one-way access regulation is exclusively driven by containment of market power, two-way access is additionally affected by collusion possibilities. Among the numerous pricing rules discussed, none clearly dominates. This article provides a roadmap vis-a-vis the competing policy objectives for access price regulation.

Where Do Developing Countries Go After Doha? An Analysis of WTO Positions and Potential Alliances

In the wake of the November 2001 Ministerial Conference in Doha, the positions of most members of the World Trade Organisation diverge, reflecting a large extent of disagreement within the organisation. This paper attempts to organise these positions and thereby inspire a debate on the possibility of collusion in the coming round of trade negotiations with a particular focus on the options of developing countries. Members' positions on a range of issues identified as important in the coming round are rated and used as inputs in a correlation analysis and two forms of cluster analyses to identify potential alliances between members with reasonably similar positions. The paper identifies nine clusters of countries that are internally similar. Among these clusters, the positions of most developing countries are most similar to the positions of the so-called Cairns group and the US, whereas the European Union and Norway are significantly isolated and positioned far away from the developing countries. The paper concludes that developing countries have opportunities of forming alliances with specific developed countries in order to promote their trade objectives in the coming round of negotiations.