We study equilibrium retention rules in a dynamic common agency game. The decision to reappoint or not is made by a committee consisting of two principals: the retention decision is uncertain if the two principals disagree. We demonstrate that all equilibrium paths exhibit what we call strategic consensus: the agent takes actions that satisfy the performance standards of all principals on the one hand, and all principals lower their standards such that the agent wants to satisfy them on the other. This result applies both to economies with sub- and super-additive costs of providing utilities to the principals.
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- Banks, Jeffrey S. & Sundaram, Rangarajan K., 1998. "Optimal Retention in Agency Problems," Journal of Economic Theory, Elsevier, vol. 82(2), pages 293-323, October.
- Bergemann, Dirk & Valimaki, Juuso, 2003.
"Dynamic common agency,"
Journal of Economic Theory,
Elsevier, vol. 111(1), pages 23-48, July.
- Dirk Bergemann & Juuso Valimaki, 1998. "Dynamic Common Agency," Discussion Papers 1259, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Dirk & Juuso Valimaki, 1998. "Dynamic Common Agency," Cowles Foundation Discussion Papers 1206, Cowles Foundation for Research in Economics, Yale University.
- Dixit, Avinash & Grossman, Gene M. & Helpman, Elhanan, 1997.
"Common Agency and Coordination: General Theory and Application to Government Policy Making,"
3450061, Harvard University Department of Economics.
- 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.
- Toke Aidt & Francesco Magris, 2004.
"Capital Taxation and Electoral Accountability,"
Documents de recherche
04-18, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne.
- John Ferejohn, 1986. "Incumbent performance and electoral control," Public Choice, Springer, vol. 50(1), pages 5-25, January.
- B. Douglas Bernheim & Michael D. Whinston, 1986. "Menu Auctions, Resource Allocation, and Economic Influence," The Quarterly Journal of Economics, Oxford University Press, vol. 101(1), pages 1-31.
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