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A Common Agency with Incomplete Information

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  • Esther Gal-Or

Abstract

Forming a common agency in oligopoly may introduce both advantageous and disadvantageous implications on the profits of the firms, if agents have access to private information about their costs. In addition to facilitating better coordination of production and pricing decisions, a common agency limits the firms' options in extracting the informational rents of their agents. When the latter informational disadvantage is significant, firms select to contract with independent agents. Contracting with independent agents arises as equilibrium behavior, when the prior uncertainty about the agent's cost or when the degree of correlation among the costs of different agents are significant.

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Bibliographic Info

Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 22 (1991)
Issue (Month): 2 (Summer)
Pages: 274-286

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Handle: RePEc:rje:randje:v:22:y:1991:i:summer:p:274-286

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Cited by:
  1. Robert Dur & Hein Roelfsema, 2006. "Social Exchange and Common Agency in Organizations," Tinbergen Institute Discussion Papers 06-111/1, Tinbergen Institute, revised 15 Oct 2008.
  2. Cecile Aubert & Jerome Pouyet, 2000. "Collusion Under Asymmetric Information and Institutional Incompleteness," Econometric Society World Congress 2000 Contributed Papers 0806, Econometric Society.
  3. Walter A Cont, 2001. "Essays on Contract Design: Delegation and Agency Problems, and Monitoring Under Collusion," Levine's Working Paper Archive 625018000000000122, David K. Levine.
  4. Osano, Hiroshi, 1998. "Moral hazard and renegotiation in multi-agent incentive contracts when each agent makes a renegotiation offer," Journal of Economic Behavior & Organization, Elsevier, vol. 37(2), pages 207-230, October.
  5. R Dur & H.J. Roelfsema, 2006. "Social exchange and common agency in organizations," Working Papers 06-11, Utrecht School of Economics.
  6. Fiocco, Raffaele, 2014. "The strategic value of partial vertical integration," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 455, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.

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