ABSTRACT
Collusion does not occur only between members of an organization. Some members may also collude with outside parties, possibly at the expense of the organization as a whole. However, the principal does not necessarily have power over non-members. Her2 ability to discipline outside parties may be restricted. In this case the principal can design policies that affect only her agents. A fullblown mechanism design approach might not be appropriate, and therefore a more circumstantial analysis of potential policy instruments is needed. As a consequence, collusion usually occurs in equilibrium. This is the situation this chapter concentrates on.
