Chapter 3 - Collusion and the theory of organizations  pp. 151-213

Collusion and the theory of organizations

By Jean Tirole

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INTRODUCTION

Collusion and the social sciences

The phenomenon of collusion, and the concomitant concepts of “group,” “power,” “bureaucracy,” and “politics” figure prominently in political science and sociology. Political scientists have always been concerned by the possibility that politicians and bureaucrats might identify with interest groups rather than serve the public interest. Montesquieu's plea for building a system of checks and balances among branches of government to limit the perversion of public policy, and the writings of the American federalists, in particular Madison, have deeply influenced the design of many constitutions. Later, Marx suggested that the State uses its coercive power to benefit large trusts. This vision of the capture of political life by interest groups was considerably enriched in the twentieth century by political scientists (Bentley, Truman) and especially by the political economists of the Chicago school (Stigler, Peltzman, Becker) and the Virginia school (Buchanan, Tollison, Tullock).

Concurrently, sociologists (Crozier, Dalton) and organization theorists (Cyert and March) have emphasized that behavior is often best predicted by the analysis of group as well as individual incentives. It would be naive to build incentives for individual members of an organization without considering their effect on collective behavior. In other words, incentive structures must account for the possibility that members collude to manipulate their functioning.