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Common Agency Equilibria with Discrete Mechanisms and Discrete Types

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  • David Martimort
  • Lars Stole

Abstract

This paper characterizes the equilibrium sets of an intrinsic common agencygame with discrete types and direct revelation mechanisms. After presentinga general algorithm to find the pure-strategy equilibria of this game, we use itto characterize these equilibria when the two principals control activitieswhich are complements in the agent’s objective function. Some of thoseequilibria may entail allocative inefficiency. For the case of substitutes, wedemonstrate non-existence of such equilibria with direct mechanisms, butexistence may be obtained with indirect mechanisms. Finally, we relax theequilibrium concept and analyze quasi-equilibria. We show that existence isthen guaranteed and characterize the corresponding allocations.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2001/wp-cesifo-2001-10/cesifo_wp572.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 572.

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Date of creation: 2001
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Handle: RePEc:ces:ceswps:_572

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References

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  1. Dasgupta, Partha & Maskin, Eric, 1986. "The Existence of Equilibrium in Discontinuous Economic Games, II: Applications," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 53(1), pages 27-41, January.
  2. David MARTIMORT, 1992. "Multi-principaux avec anti-sélection," Annales d'Economie et de Statistique, ENSAE, issue 28, pages 1-37.
  3. Martimort David & Stole Lars, 2003. "Contractual Externalities and Common Agency Equilibria," The B.E. Journal of Theoretical Economics, De Gruyter, De Gruyter, vol. 3(1), pages 1-40, July.
  4. Peters, Michael, 2001. "Common Agency and the Revelation Principle," Econometrica, Econometric Society, Econometric Society, vol. 69(5), pages 1349-72, September.
  5. Martimort, D., 1992. "Exclusive Dealing, Common Agency and Multiprincipals Incentive Thoery," Papers, Toulouse - GREMAQ 92.278, Toulouse - GREMAQ.
  6. David Martimort & Lars Stole, 2001. "The Revelation and Delegation Principles in Common Agency Games," CESifo Working Paper Series 575, CESifo Group Munich.
  7. Myerson, Roger B., 1982. "Optimal coordination mechanisms in generalized principal-agent problems," Journal of Mathematical Economics, Elsevier, vol. 10(1), pages 67-81, June.
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Cited by:
  1. Hans Hvide & Tore Leite, 2010. "Optimal debt contracts under costly enforcement," Economic Theory, Springer, Springer, vol. 44(1), pages 149-165, July.
  2. Hvide, Hans K., 2005. "Optimal contracts under imperfect enforcement revisited," Discussion Papers, Department of Business and Management Science, Norwegian School of Economics 2005/4, Department of Business and Management Science, Norwegian School of Economics.

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