Christopher Stapenhurst (QSMS) will present “Red and Gold (with Andrew Clausen and John Moore)” on November 15th, 2024, at 10:30 AM, in room QA406.
Abstract:
Clausen and Stapenhurst (2024) obtain a lower bound on the cost of the optimal static, bribe-proof mechanism. But what about dynamic mechanisms? We propose a mechanism called “Red and Gold” that uses a nuisance action to deter bribes at arbitrarily small cost. The agent receives either a red or a gold ticket. If the monitor reports shirking then she is asked to guess the colour of the agent’s ticket. If the monitor’s guess is correct, then she receives an arbitrarily small reward, and the agent receives a large fine. Otherwise, the agent gets no fine. It follows that any equilibrium belief of the monitor leaves exactly one of the agent’s types better off rejecting bribes. But then the monitor can perfectly infer the agent’s type, so the type that rejects bribes would be better off accepting them. Hence there can be no bribes in equilibrium.