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On multiple-principal multiple-agent models of moral hazard

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  • Andrea Attar
  • Eloisa Campioni
  • Gwenaël Piaser

    ()
    (Luxembourg School of Finance, University of Luxembourg)

  • Uday Rajan
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    Abstract

    In multiple-principal multiple-agent models of moral hazard, we provide sufficient conditions for the outcomes of pure-strategy equilibria in direct mechanisms to be preserved when principals can offer indirect communication schemes. The conditions include strong robustness in the direct mechanism game, as developed in the literature on competing mechanisms by Peters (2001) and Han (2007a), and a no-correlation property we define. We provide a rationale for restricting attention to take-it or leave-it offers, as is typically done in applications. We show via examples that it is necessary to allow direct mechanisms to be stochastic and to include private recommendations from principals to agents to preserve the corresponding equilibrium outcomes, and that the no-correlation condition is tight.

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    Bibliographic Info

    Paper provided by Luxembourg School of Finance, University of Luxembourg in its series LSF Research Working Paper Series with number 07-01.

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    Date of creation: 2007
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    Handle: RePEc:crf:wpaper:07-01

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    Keywords: Moral hazard; multiple principal; multiple agent; direct mechanisms.;

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    Cited by:
    1. Andrea Attar & Eloisa Campioni & Gwenael Piaser, 2011. "Information Revelation in Competing Mechanism Games," CEIS Research Paper 205, Tor Vergata University, CEIS, revised 04 Jul 2011.
    2. repec:ebl:ecbull:v:4:y:2005:i:11:p:1-6 is not listed on IDEAS
    3. Gwenael Piaser, 2005. "Stochastic and deterministic menus in common agency games," Economics Bulletin, AccessEcon, vol. 4(11), pages 1-6.

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