Sergio Currarini () (Department of Economics, University Of Venice Ca’ Foscari) Francesco Feri (Department of Economics, University Of Venice Ca’ Foscari)
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We study a simple contracting game with a principal and two agents. Contracts exert an externalities on non contractors. The principal can either contract both agents in a centralized manner, or delegate one agent to contract the other. We show that the choice of the principal depends on the sign of the externality. If this is positive, the principal prefers to delegate as long as the agency costs are not too high; if the externality is negative, the principal prefers to centralize for all sizes of agency costs.
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Paper provided by University of Venice "Ca' Foscari", Department of Economics in its series Working Papers with number
2006_15.
Find related papers by JEL classification: D02 - Microeconomics - - General - - - Institutions: Design, Formation, and Operations D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
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