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Common Agency with Risk-Averse Agent

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  • Semenov, Aggey

Abstract

I consider a common agency model under adverse selection with a risk averse agent. Contracting takes place ex ante when all players have symmetric, although incomplete, information. The coordination problem between principals leads to more distortion in the optimal policy from the first best compared to the case of risk neutrality. In contrast with the risk neutral case the principals are unable to screen completely the agent's preferences if she/he is sufficiently risk averse. However, if the agent is almost risk neutral the output is separating, but the transfer schedules keep track of asymmetric contractual externality. When risk aversion goes to zero the transfers become truthful as in the complete information case.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 6991.

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Date of creation: 03 Jan 2006
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Handle: RePEc:pra:mprapa:6991

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  1. 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.
  2. Bernheim, B Douglas & Whinston, Michael D, 1986. "Menu Auctions, Resource Allocation, and Economic Influence," The Quarterly Journal of Economics, MIT Press, vol. 101(1), pages 1-31, February.
  3. David Martimort & Lars Stole, 2001. "The Revelation and Delegation Principles in Common Agency Games," CESifo Working Paper Series 575, CESifo Group Munich.
  4. 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.
  5. Michael Peters, 1999. "Common Agency and the Revelation Principle," Working Papers peters-99-01, University of Toronto, Department of Economics.
  6. Martimort, David & Stole, Lars, 2009. "Selecting equilibria in common agency games," Journal of Economic Theory, Elsevier, vol. 144(2), pages 604-634, March.
  7. Martimort, David, 1996. "The multiprincipal nature of government," European Economic Review, Elsevier, vol. 40(3-5), pages 673-685, April.
  8. Martimort, David & Semenov, Aggey, 2008. "Ideological Uncertainty and Lobbying Competition," MPRA Paper 6992, University Library of Munich, Germany.
  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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