This paper studies the notion of strongly robust equilibrium (SRE) in common agency with multiple principals that is not only independent of the nature of competition embedded in any ad hoc common agency game but also free from a hierarchy of principals' beliefs on the continuation equilibrium off the equilibrium path following any principal's deviation to any complex mechanism. It shows that an equilibrium relative to any set of mechanisms is strongly robust if and only if it survives in every pure-strategy continuation equilibrium. Furthermore, the set of SRE allocations relative to any arbitrary set of complex mechanisms is equal to the set of SRE allocations relative to the set of menus. As for applications, this paper shows that each principal can infer a best continuation equilibrium for him as a continuation equilibrium in which the agent tells the truth only to him in a class of direct mechanisms with an endogenous incentive compatibility. Subsequently, the existence of SRE can be examined by checking whether the truth-telling continuation equilibria, one for each principal, induce a fixed point of a decision profile only on the equilibrium path given principals' direct mechanisms.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. 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.
Publisher Info
Paper provided by Microeconomics.ca Website in its series Micro Theory Working Papers with number
han-07-05-29-08-55-07.
Find related papers by JEL classification: C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games D89 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Other
This paper has been announced in the following NEP Reports: