IDEAS home Printed from
MyIDEAS: Login to save this article or follow this journal

The Principal-Agent Matching Market

  • Dam Kaniska


    (Center for Operations Research and Econometrics, Universite Catholique de Louvain, Belgium and Centro de Investigacion y Docencia Economicas, Mexico)

  • Perez-Castrillo David


    (Universitat Autonoma de Barcelona, Spain)

We propose an agency model based on competitive markets in order to analyse an economy with several homogeneous principals and heterogeneous agents. We model the principal-agent economy as a two-sided matching game and characterise the set of stable outcomes (equilibria) of this market. In this regard we generalise the assignment game of Shapley and Shubik (1972). Unlike in the standard principal-agent theory, equilibrium payoffs of all the individuals are endogenous, equilibrium contracts are Pareto optimal, and the incremental surplus generated in a principal-agent relationship accrues to the tenant. We design a simple non-cooperative game which implements the set of stable outcomes in subgame perfect equilibrium. We also suggest policy measures in relation to efficiency and income distribution.

If you experience problems downloading a file, check if you have the proper application to view it first. 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.

File URL:
Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by De Gruyter in its journal The B.E. Journal of Theoretical Economics.

Volume (Year): 2 (2006)
Issue (Month): 1 (August)
Pages: 1-34

in new window

Handle: RePEc:bpj:bejtec:v:frontiers.2:y:2006:i:1:n:1
Contact details of provider: Web page:

Order Information: Web:

References listed on IDEAS
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.:

as in new window
  1. Serfes, Konstantinos, 2005. "Risk sharing vs. incentives: Contract design under two-sided heterogeneity," Economics Letters, Elsevier, vol. 88(3), pages 343-349, September.
  2. Legros, Patrick & Newman, Andrew, 2002. "Assortative Matching in a Non-transferable World," CEPR Discussion Papers 3469, C.E.P.R. Discussion Papers.
  3. Sengupta, Kunal, 1997. "Limited liability, moral hazard and share tenancy," Journal of Development Economics, Elsevier, vol. 52(2), pages 393-407, April.
  4. Fátima Barros & Inés Macho-Stadler, 1998. "Competition for Managers and Product Market Efficiency," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 7(1), pages 89-103, 03.
  5. Perez-Castrillo, David & Sotomayor, Marilda, 2002. "A Simple Selling and Buying Procedure," Journal of Economic Theory, Elsevier, vol. 103(2), pages 461-474, April.
  6. Alcalde, Jose & Perez-Castrillo, David & Romero-Medina, Antonio, 1998. "Hiring Procedures to Implement Stable Allocations," Journal of Economic Theory, Elsevier, vol. 82(2), pages 469-480, October.
  7. Perotti, Roberto, 1996. "Redistribution and Non-consumption Smoothing in an Open Economy," Review of Economic Studies, Wiley Blackwell, vol. 63(3), pages 411-33, July.
  8. de Mesa, David & Webb, David C., 1992. "Efficient credit rationing," European Economic Review, Elsevier, vol. 36(6), pages 1277-1290, August.
  9. Kamecke, U, 1989. "Non-cooperative Matching Games," International Journal of Game Theory, Springer, vol. 18(4), pages 423-31.
  10. Dilip Mookherjee & Debraj Ray, 2002. "Contractual Structure and Wealth Accumulation," American Economic Review, American Economic Association, vol. 92(4), pages 818-849, September.
  11. Ghatak, Maitreesh & Pandey, Priyanka, 2000. "Contract choice in agriculture with joint moral hazard in effort and risk," Journal of Development Economics, Elsevier, vol. 63(2), pages 303-326, December.
  12. Daniel A. Ackerberg & Maristella Botticini, 2002. "Endogenous Matching and the Empirical Determinants of Contract Form," Journal of Political Economy, University of Chicago Press, vol. 110(3), pages 564-591, June.
  13. José Alcalde Pérez & Antonio Romero-Medina, 1996. "Simple mechanisms to implement the core of college admissions problems," Working Papers. Serie AD 1996-13, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  14. Tayfun Sönmez & Tarik Kara, 1997. "Implementation of college admission rules (*)," Economic Theory, Springer, vol. 9(2), pages 197-218.
  15. Besanko, David & Thakor, Anjan V, 1987. "Collateral and Rationing: Sorting Equilibria in Monopolistic and Competitive Credit Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(3), pages 671-89, October.
  16. Bester,Helmut Hellwig,Martin, 1987. "Moral hazard and equilibrium credit rationing: An overview of the issues," Discussion Paper Serie A 125, University of Bonn, Germany.
  17. Basu, Kaushik, 1992. "Limited liability and the existence of share tenancy," Journal of Development Economics, Elsevier, vol. 38(1), pages 203-220, January.
  18. V. Bhaskar, 2002. "Relative Performance Evaluation and Limited Liability," Economics Discussion Papers 550, University of Essex, Department of Economics.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:bpj:bejtec:v:frontiers.2:y:2006:i:1:n:1. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Golla)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.