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Negotiation and Take it or Leave it in Common Agency

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Author Info
Michael Peters

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Abstract

This short paper considers the validity of assuming that principals make their common agent a single take it or leave it contract offer instead of negotiating over the contract in a more complex way. The interest in this question arises from recent examples in the literature that illustrate equilibrium allocations that can be supported with negotiation, but not with simple take it or leave it offers. It is shown that with symmetric information, pure strategy equilibrium with take it or leave it offers are also equilibria when principals are allowed to negotiate. We also provide a class of environments in which 'pure strategy' equilibria with negotiation can all be supported with simple take it or leave it offers. The environment is restrictive, but encompasses the environment studied by Bernheim and Whinston (1986), as well as the environment involved in a simple Bertrand pricing problem similar to Klemperer and Meyer (1989).

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File URL: http://repec.economics.utoronto.ca/files/UT-ECIPA-PETERS-00-02.pdf
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Publisher Info
Paper provided by University of Toronto, Department of Economics in its series Working Papers with number peters-00-02.

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Length: 20 pages
Date of creation: 11 May 2000
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Handle: RePEc:tor:tecipa:peters-00-02

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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.:
  1. Klemperer, Paul D & Meyer, Margaret A, 1989. "Supply Function Equilibria in Oligopoly under Uncertainty," Econometrica, Econometric Society, vol. 57(6), pages 1243-77, November. [Downloadable!] (restricted)
  2. Michael Peters, 1999. "Common Agency and the Revelation Principle," Working Papers peters-99-01, University of Toronto, Department of Economics. [Downloadable!]
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  3. Bruno Biais & David Martimort & Jean-Charles Rochet, 2000. "Competing Mechanisms in a Common Value Environment," Econometrica, Econometric Society, vol. 68(4), pages 799-838, July.
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  4. Bernheim, B Douglas & Whinston, Michael D, 1986. "Common Agency," Econometrica, Econometric Society, vol. 54(4), pages 923-42, July. [Downloadable!] (restricted)
  5. Larry Epstein & Michael Peters, 1996. "A Revelation Principle For Competing Mechanisms," Working Papers peters-96-02, University of Toronto, Department of Economics. [Downloadable!]
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  6. Dixit, Avinash & Grossman, Gene M & Helpman, Elhanan, 1997. "Common Agency and Coordination: General Theory and Application to Government Policy Making," Journal of Political Economy, University of Chicago Press, vol. 105(4), pages 752-69, August.
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(explanations, 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.)

  1. Andrea Attar & Eloisa Campioni & Gwenäel Piaser, 2006. "Multiple Lending and Constrained Efficiency in the Credit Market," Working Papers 2006_29, University of Venice "Ca' Foscari", Department of Economics. [Downloadable!]
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  2. Andrea Attar & Nicolas Porteiro & Gwenaël Piaser, 2006. "A note on Common Agency models of moral hazard," Working Papers 2006_36, University of Venice "Ca' Foscari", Department of Economics. [Downloadable!]
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  3. Khalil, Fahad & Martimort, David & Parigi, Bruno, 2004. "Monitoring a Common Agent: Implications for Financial Contracting," IDEI Working Papers 321, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
  4. Gwenaël Piaser, 2006. "The Biais-Martimort-Rochet equilibrium with direct mechanisms," Working Papers 2006_33, University of Venice "Ca' Foscari", Department of Economics. [Downloadable!]
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  5. ATTAR, Andrea & CAMPIONI, Eloisa & PIASER, Gwena‘l & RAJAN, Uday, 2004. "Pure strategy and no-externalities with multiple agents : a comment," CORE Discussion Papers 2004050, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE). [Downloadable!]
  6. Attar Andrea & Gwenäel Piaser & Nicolas Porteiro, 2006. "Common Agency Games with Separable Preferences," Working Papers 2006_28, University of Venice "Ca' Foscari", Department of Economics. [Downloadable!]
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  7. Fahad Khalil & David Martimort & Bruno Maria Parigi, 2005. "Monitoring a Common Agent: Implications for Financial Contracting," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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