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Common agency with risk-averse agent

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  • Semenov, Aggey

Abstract

In a common agency model with a risk-averse agent and private information distortion in the equilibrium policy from the first-best is greater compared to the case of a risk-neutral agent. The principals are unable to screen completely the agent's preferences if he is sufficiently risk-averse: there is bunching in the contract. The contribution schedules keep track of informational externality. However, when the coefficient of risk-aversion goes to zero the contributions become truthful as in the complete information case.

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Bibliographic Info

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

Volume (Year): 46 (2010)
Issue (Month): 1 (January)
Pages: 38-49

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Handle: RePEc:eee:mateco:v:46:y:2010:i:1:p:38-49

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Web page: http://www.elsevier.com/locate/jmateco

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Keywords: Common agency Asymmetric information Risk-aversion;

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  1. Laussel, Didier & Le Breton, Michel, 1998. "Efficient Private Production of Public Goods under Common Agency," Games and Economic Behavior, Elsevier, vol. 25(2), pages 194-218, November.
  2. Peters, Michael, 2001. "Common Agency and the Revelation Principle," Econometrica, Econometric Society, Econometric Society, vol. 69(5), pages 1349-72, September.
  3. David Martimort, 1996. "The multiprincipal nature of government," Working Papers 153244, Institut National de la Recherche Agronomique, France.
  4. David Martimort & Lars Stole, 2001. "The Revelation and Delegation Principles in Common Agency Games," CESifo Working Paper Series 575, CESifo Group Munich.
  5. Martimort, David & Semenov, Aggey, 2008. "Ideological Uncertainty and Lobbying Competition," MPRA Paper 6992, University Library of Munich, Germany.
  6. 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.
  7. Martimort, David & Stole, Lars, 2009. "Selecting equilibria in common agency games," Journal of Economic Theory, Elsevier, vol. 144(2), pages 604-634, March.
  8. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, December.
  9. Martimort, David & Semenov, Aggey, 2007. "The pluralistic view of politics: Asymmetric lobbyists, ideological uncertainty and political entry," Economics Letters, Elsevier, vol. 97(2), pages 155-161, November.
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