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Existence of equilibrium in common agency games with adverse selection

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  • Carmona, Guilherme
  • Fajardo, José

Abstract

We establish the existence of subgame perfect equilibria in general menu games, known to be sufficient to analyze common agency problems. Our main result states that every menu game satisfying enough continuity properties has a subgame perfect equilibrium. Despite the continuity assumptions that we make, discontinuities naturally arise due to the absence, in general, of continuous optimal choices for the agent. Our approach, then, is based on (and generalizes) the existence theorem of [Simon, L., Zame, W., 1990. Discontinuous games and endogenous sharing rules. Econometrica 58 (4), 861-872] designed for discontinuous games.

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Bibliographic Info

Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 66 (2009)
Issue (Month): 2 (July)
Pages: 749-760

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Handle: RePEc:eee:gamebe:v:66:y:2009:i:2:p:749-760

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Web page: http://www.elsevier.com/locate/inca/622836

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Keywords: Common agency Menu games Subgame perfect equilibrium;

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References

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  1. David Kreps & Robert Wilson, 1998. "Sequential Equilibria," Levine's Working Paper Archive 237, David K. Levine.
  2. Page Junior, Frank H. & Monteiro, Paulo Klinger, 2002. "Three Principles of Competitive Nonlinear Pricing," Economics Working Papers (Ensaios Economicos da EPGE) 442, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  3. Martimort, David & Semenov, Aggey, 2008. "Ideological Uncertainty and Lobbying Competition," MPRA Paper 6992, University Library of Munich, Germany.
  4. Michael Peters, 1999. "Common Agency and the Revelation Principle," Working Papers peters-99-01, University of Toronto, Department of Economics.
  5. David Martimort & Lars Stole, 2002. "The Revelation and Delegation Principles in Common Agency Games," Econometrica, Econometric Society, vol. 70(4), pages 1659-1673, July.
  6. Martimort David & Stole Lars, 2003. "Contractual Externalities and Common Agency Equilibria," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 3(1), pages 1-40, July.
  7. Leo K. Simon and William R. Zame., 1987. "Discontinuous Games and Endogenous Sharing Rules," Economics Working Papers 8756, University of California at Berkeley.
  8. Paulo Monteiro & Frank Page, 2008. "Catalog competition and Nash equilibrium in nonlinear pricing games," Economic Theory, Springer, vol. 34(3), pages 503-524, March.
  9. Maskin, Eric & Tirole, Jean, 1990. "The Principal-Agent Relationship with an Informed Principal: The Case of Private Values," Econometrica, Econometric Society, vol. 58(2), pages 379-409, March.
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Citations

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Cited by:
  1. Ulrich Horst & Santiago Moreno-Bromberg, 2011. "Efficiency and Equilibria in Games of Optimal Derivative Design," Papers 1107.0839, arXiv.org.
  2. Frank H. Page, Jr. & Paulo K. Monteiro, 2007. "Endogenous Mechanisms and Nash Equilibrium in Competitive Contracting," Caepr Working Papers 2007-025, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
  3. Monteiro, Paulo K. & Page Jr., Frank H., 2009. "Endogenous mechanisms and Nash equilibrium in competitive contracting games," Journal of Mathematical Economics, Elsevier, vol. 45(9-10), pages 664-678, September.
  4. Martimort, David & Stole, Lars, 2012. "Representing equilibrium aggregates in aggregate games with applications to common agency," Games and Economic Behavior, Elsevier, vol. 76(2), pages 753-772.

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