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Strategic consensus

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  • Aidt, Toke S.
  • Dutta, Jayasri

Abstract

We study equilibrium retention rules in a dynamic common agency game. The decision to reappoint or not is made by a committee consisting of two principals: the retention decision is uncertain if the two principals disagree. We demonstrate that all equilibrium paths exhibit what we call strategic consensus: the agent takes actions that satisfy the performance standards of all principals on the one hand, and all principals lower their standards such that the agent wants to satisfy them on the other. This result applies both to economies with sub- and super-additive costs of providing utilities to the principals.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Mathematical Economics.

Volume (Year): 40 (2004)
Issue (Month): 3-4 (June)
Pages: 227-245

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Handle: RePEc:eee:mateco:v:40:y:2004:i:3-4:p:227-245

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  1. Dixit, Avinash & Grossman, Gene M. & Helpman, Elhanan, 1997. "Common Agency and Coordination: General Theory and Application to Government Policy Making," Scholarly Articles 3450061, Harvard University Department of Economics.
  2. Bergemann, Dirk & Valimaki, Juuso, 2003. "Dynamic common agency," Journal of Economic Theory, Elsevier, vol. 111(1), pages 23-48, July.
  3. John Ferejohn, 1986. "Incumbent performance and electoral control," Public Choice, Springer, Springer, vol. 50(1), pages 5-25, January.
  4. Bernheim, B Douglas & Whinston, Michael D, 1986. "Menu Auctions, Resource Allocation, and Economic Influence," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 101(1), pages 1-31, February.
  5. Aidt, T. & Magris, F., 2003. "Capital Taxation and Electoral Accountability," Cambridge Working Papers in Economics 0318, Faculty of Economics, University of Cambridge.
  6. Banks, Jeffrey S. & Sundaram, Rangarajan K., 1998. "Optimal Retention in Agency Problems," Journal of Economic Theory, Elsevier, vol. 82(2), pages 293-323, October.
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Cited by:
  1. Aidt, T. & Dutta, J., 2010. "Fiscal Federalism and Electoral Accountability," Cambridge Working Papers in Economics 1021, Faculty of Economics, University of Cambridge.
  2. Dalibor Eterovic, 2009. "Policy Reform Under Electoral Uncertainty," Working Papers Central Bank of Chile, Central Bank of Chile 546, Central Bank of Chile.
  3. Aidt, T.S. & Dutta, J., 2008. "Electoral Uncertainty and Public Goods," Cambridge Working Papers in Economics 0843, Faculty of Economics, University of Cambridge.

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