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Existence of equilibrium in common agency games with adverse selection

  • Carmona, Guilherme
  • Fajardo, José

We establish the existence of subgame perfect equilibria in general menu games, known to be sufficient to analyze common agency problems. Our main result states that every menu game satisfying enough continuity properties has a subgame perfect equilibrium. Despite the continuity assumptions that we make, discontinuities naturally arise due to the absence, in general, of continuous optimal choices for the agent. Our approach, then, is based on (and generalizes) the existence theorem of [Simon, L., Zame, W., 1990. Discontinuous games and endogenous sharing rules. Econometrica 58 (4), 861-872] designed for discontinuous games.

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Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 66 (2009)
Issue (Month): 2 (July)
Pages: 749-760

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Handle: RePEc:eee:gamebe:v:66:y:2009:i:2:p:749-760
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622836

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  1. Leo K. Simon and William R. Zame., 1987. "Discontinuous Games and Endogenous Sharing Rules," Economics Working Papers 8756, University of California at Berkeley.
  2. David Martimort & Lars Stole, 2002. "The Revelation and Delegation Principles in Common Agency Games," Econometrica, Econometric Society, vol. 70(4), pages 1659-1673, July.
  3. David Kreps & Robert Wilson, 1998. "Sequential Equilibria," Levine's Working Paper Archive 237, David K. Levine.
  4. David Martimort & Lars Stole, 2001. "Contractual Externalities and Common Agency Equilibria," CESifo Working Paper Series 581, CESifo Group Munich.
  5. Frank Page & Paulo Monteiro, 2001. "Three Principles of Competitive Nonlinear Pricing," Economics Bulletin, AccessEcon, vol. 28(11), pages A0.
  6. Paulo Monteiro & Frank Page, 2008. "Catalog competition and Nash equilibrium in nonlinear pricing games," Economic Theory, Springer, vol. 34(3), pages 503-524, March.
  7. Martimort, David & Semenov, Aggey, 2008. "Ideological Uncertainty and Lobbying Competition," MPRA Paper 6992, University Library of Munich, Germany.
  8. Peters, Michael, 2001. "Common Agency and the Revelation Principle," Econometrica, Econometric Society, vol. 69(5), pages 1349-72, September.
  9. Maskin, Eric & Tirole, Jean, 1990. "The Principal-Agent Relationship with an Informed Principal: The Case of Private Values," Econometrica, Econometric Society, vol. 58(2), pages 379-409, March.
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