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Negotiation and Take it or Leave it in Common Agency

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  • Michael Peters

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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Bibliographic 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
Date of revision:
Handle: RePEc:tor:tecipa:peters-00-02

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References

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  1. Bernheim, B Douglas & Whinston, Michael D, 1986. "Common Agency," Econometrica, Econometric Society, vol. 54(4), pages 923-42, July.
  2. Larry Epstein & Michael Peters, 1996. "A Revelation Principle For Competing Mechanisms," Working Papers peters-96-02, University of Toronto, Department of Economics.
  3. Peters, Michael, 2001. "Common Agency and the Revelation Principle," Econometrica, Econometric Society, vol. 69(5), pages 1349-72, September.
  4. 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.
  5. Klemperer, Paul D & Meyer, Margaret A, 1989. "Supply Function Equilibria in Oligopoly under Uncertainty," Econometrica, Econometric Society, vol. 57(6), pages 1243-77, November.
  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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Citations

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Cited by:
  1. Attar, Andrea & Campioni, Eloisa & Piaser, Gwenaël, 2013. "Two-sided communication in competing mechanism games," Journal of Mathematical Economics, Elsevier, vol. 49(1), pages 62-70.
  2. ATTAR, Andrea & CAMPIONI, Eloisa & PIASER, Gwenaël & 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).
  3. Andrea Attar & Eloisa Campioni & Gwenäel Piaser, 2006. "Multiple Lending and Constrained Efficiency in the Credit Market," Working Papers 2006_29, Department of Economics, University of Venice "Ca' Foscari".
  4. Fahad Khalil & Bruno Parigi & David Martimort, 2007. "Monitoring a Common Agent: implications for financial contracting," Working Papers UWEC-2003-04-P, University of Washington, Department of Economics.
  5. Andrea Attar & Thomas Mariotti & François Salanié, 2011. "Non-Exclusive Competition under Adverse Selection," CEIS Research Paper 192, Tor Vergata University, CEIS, revised 31 Mar 2011.
  6. Chiesa, Gabriella & Denicolò, Vincenzo, 2009. "Trading with a common agent under complete information: A characterization of Nash equilibria," Journal of Economic Theory, Elsevier, vol. 144(1), pages 296-311, January.
  7. Gwenael Piaser, 2004. "The Biais-Martimort-Rochet equilibrium with direct mechanisms," Game Theory and Information 0412007, EconWPA.
  8. repec:hal:wpaper:halshs-00586854 is not listed on IDEAS
  9. Andrea Attar & Eloisa Campioni & Gwenaël Piaser & Uday Rajan, 2012. "Competing mechanism games of moral hazard: communication and robustness," Review of Economic Design, Springer, vol. 16(4), pages 283-296, December.
  10. Attar, Andrea & Piaser, Gwenael & Porteiro, Nicolas, 2007. "A note on Common Agency models of moral hazard," Economics Letters, Elsevier, vol. 95(2), pages 278-284, May.
  11. Krasteva, Silvana & Yildirim, Huseyin, 2012. "On the role of confidentiality and deadlines in bilateral negotiations," Games and Economic Behavior, Elsevier, vol. 75(2), pages 714-730.
  12. Burnett, Johann Caro & Carrasco, Vinicius, 2011. "Coordination and the provision of incentives to a common regulated firm," International Journal of Industrial Organization, Elsevier, vol. 29(5), pages 606-627, September.

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