Collusion-Proof Mechanism in Supervising in Public Administration

Collusion is a hackneyed phenomenon in supervising in public administration.Two-side collusion model is too simple to analyze it,and we should consider the collusion probability and collusion-proof mechanism in a multiple-tier-agency complete contract framework.This paper presents a government/supervisor/firmthree-tier hierarchy model and shows that,an ex ante lowcost-and-high-efficiency punishment device is important for collusion-proof contract.Contract based on collusion-proof incentive compensations absolutely will have little efficiency,and contract based on punishment device absolutely will have efficiency only in some specific conditions.Our model can also be used in analyzing the government choice behavior in trade-off of social benefits and social costs of production.