This paper considers a principal-agent model with adverse selection, in which collusion among the agents is possible. We compare the optimal outcome in two cases: (i) the principal can perfectly discriminate the transfers to the agents, and (ii) the principal's power to discriminate the...

We compare rigid and flexible organizations when side contracting among agents is possible. Within a rigid organization, each agent can produce only one component of the final product, whereas within a flexible organization, the agents can reallocate their tasks during the production period. In...