Advanced Search
MyIDEAS: Login

On the Optimality of Privacy in Sequential Contracting

Contents:

Author Info

  • Alessandro Pavan

Abstract

This paper studies the exchange of information between two principals who contract sequentially with the same agent, as in the case of a buyer who purchases from multiple sellers. We show that when (a) the upstream principal is not personally interested in the downstream level of trade, (b) the agent’s valuations are positively correlated, and (c) preferences in the downstream relationship are separable, then it is optimal for the upstream principal to offer the agent full privacy. On the contrary, when any of these conditions is violated, there exist preferences for which disclosure is strictly optimal, even if the downstream principal does not pay for the information. We also examine the effects of disclosure on welfare and show that it does not necessarily reduce the agent’s surplus in the two relationships and in some cases may even yield a Pareto improvement. The paper describes this condition and its implications.

(This abstract was borrowed from another version of this item.)

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://faculty.econ.nwu.edu/faculty/pavan/privacy.pdf
Our checks indicate that this address may not be valid because: 500 Can't connect to faculty.econ.nwu.edu:80 (Bad hostname). If this is indeed the case, please notify (David K. Levine)
Download Restriction: no

Bibliographic Info

Paper provided by UCLA Department of Economics in its series Theory workshop papers with number 658612000000000067.

as in new window
Length:
Date of creation: 15 Apr 2004
Date of revision:
Handle: RePEc:cla:uclatw:658612000000000067

Contact details of provider:
Web page: http://www.dklevine.com/

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. David MARTIMORT, 1992. "Multi-principaux avec anti-sélection," Annales d'Economie et de Statistique, ENSAE, issue 28, pages 1-37.
  2. Taylor, Curtis R., 2003. "Privacy in Competitive Markets," Working Papers 03-10, Duke University, Department of Economics.
  3. Haile, Philip A., 2003. "Auctions with private uncertainty and resale opportunities," Journal of Economic Theory, Elsevier, vol. 108(1), pages 72-110, January.
  4. David Martimort & Lars Stole, 2001. "Contractual Externalities and Common Agency Equilibria," CESifo Working Paper Series 581, CESifo Group Munich.
  5. Raith, Michael, 1996. "A General Model of Information Sharing in Oligopoly," Journal of Economic Theory, Elsevier, vol. 71(1), pages 260-288, October.
  6. Jean-Jacques LAFFONT & Jean TIROLE, 1990. "Adverse Selection and Renegotiation in Procurement," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 9005, Université de Lausanne, Faculté des HEC, DEEP.
  7. Giacomo Calzolari & Alessandro Pavan, 2004. "Monopoly with Resale," Discussion Papers 1393, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  8. Zheng, Charles Zhoucheng, 2002. "Optimal Auction with Resale," Staff General Research Papers 12664, Iowa State University, Department of Economics.
  9. Bester, Helmut & Strausz, Roland, 2001. "Contracting with Imperfect Commitment and the Revelation Principle: The Single Agent Case," Econometrica, Econometric Society, vol. 69(4), pages 1077-98, July.
  10. Helmut Bester & Roland Strausz, . "Imperfect Commitment and the Revelation Principle," Papers 004, Departmental Working Papers.
  11. Padilla, A.J. & Pagano, M., 1994. "Endogenous Communication Among Lenders and Entrepreneurial Incentives," Papers 9407, Centro de Estudios Monetarios Y Financieros-.
  12. Epstein, Larry G. & Peters, Michael, 1999. "A Revelation Principle for Competing Mechanisms," Journal of Economic Theory, Elsevier, vol. 88(1), pages 119-160, September.
  13. Bergemann, Dirk & Valimaki, Juuso, 2003. "Dynamic common agency," Journal of Economic Theory, Elsevier, vol. 111(1), pages 23-48, July.
  14. Jean-Jacques Laffont & Jean Tirole, 1985. "The Dynamics of Incentive Contracts," Working papers 397, Massachusetts Institute of Technology (MIT), Department of Economics.
  15. Baron, David P. & Besanko, David, 1984. "Regulation and information in a continuing relationship," Information Economics and Policy, Elsevier, vol. 1(3), pages 267-302.
  16. Ilya Segal & Michael D. Whinston, 2003. "Robust Predictions for Bilateral Contracting with Externalities," Econometrica, Econometric Society, vol. 71(3), pages 757-791, 05.
  17. Martimort, David, 1999. "Renegotiation Design with Multiple Regulators," Journal of Economic Theory, Elsevier, vol. 88(2), pages 261-293, October.
  18. Jappelli, Tullio & Pagano, Marco, 1991. "Information Sharing in Credit Markets," CEPR Discussion Papers 579, C.E.P.R. Discussion Papers.
  19. Alessandro Lizzeri, 1999. "Information Revelation and Certification Intermediaries," RAND Journal of Economics, The RAND Corporation, vol. 30(2), pages 214-231, Summer.
  20. Cho, In-Koo & Kreps, David M, 1987. "Signaling Games and Stable Equilibria," The Quarterly Journal of Economics, MIT Press, vol. 102(2), pages 179-221, May.
  21. Prat, A. & Rustichini, A., 1998. "Sequential Common Agency," Discussion Paper 1998-95, Tilburg University, Center for Economic Research.
  22. Alessandro Acquisti & Hal R. Varian, 2002. "Contidioning Prices on Purchase History," Microeconomics 0210001, EconWPA.
  23. Paul R. Milgrom, 1979. "Good Nevs and Bad News: Representation Theorems and Applications," Discussion Papers 407R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  24. 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.
  25. David Martimort & Lars Stole, 2001. "The Revelation and Delegation Principles in Common Agency Games," CESifo Working Paper Series 575, CESifo Group Munich.
  26. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, December.
  27. Peters, Michael, 2001. "Common Agency and the Revelation Principle," Econometrica, Econometric Society, vol. 69(5), pages 1349-72, September.
  28. Andrew F. Daughety & Jennifer F. Reinganum, 2002. "Informational Externalities in Settlement Bargaining: Confidentiality and Correlated Culpability," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 587-604, Winter.
  29. Ilya Segal, 1999. "Contracting With Externalities," The Quarterly Journal of Economics, MIT Press, vol. 114(2), pages 337-388, May.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:cla:uclatw:658612000000000067. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (David K. Levine).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.