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A Common Agency with Incomplete Information

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  • Esther Gal-Or

Abstract

Forming a common agency in oligopoly may introduce both advantageous and disadvantageous implications on the profits of the firms, if agents have access to private information about their costs. In addition to facilitating better coordination of production and pricing decisions, a common agency limits the firms' options in extracting the informational rents of their agents. When the latter informational disadvantage is significant, firms select to contract with independent agents. Contracting with independent agents arises as equilibrium behavior, when the prior uncertainty about the agent's cost or when the degree of correlation among the costs of different agents are significant.

Suggested Citation

  • Esther Gal-Or, 1991. "A Common Agency with Incomplete Information," RAND Journal of Economics, The RAND Corporation, vol. 22(2), pages 274-286, Summer.
  • Handle: RePEc:rje:randje:v:22:y:1991:i:summer:p:274-286
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    Cited by:

    1. Dur, Robert & Roelfsema, Hein, 2010. "Social exchange and common agency in organizations," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 39(1), pages 55-63, January.
    2. Fiocco, Raffaele, 2016. "The strategic value of partial vertical integration," European Economic Review, Elsevier, vol. 89(C), pages 284-302.
    3. Semih Koray & Rudolf Kerschbamer, 2001. "original papers : Multiprincipals multiagents incentive design," Review of Economic Design, Springer;Society for Economic Design, vol. 6(1), pages 5-40.
    4. Batabyal, Amitrajeet A, 1998. "On land use, minerals development, and institutional design in the American west," Resources Policy, Elsevier, vol. 24(3), pages 139-146, September.
    5. Esther Gal-Or, 1997. "Multiprincipal Agency Relationships as Implied by Product Market Competition," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(1), pages 235-256, June.
    6. Versaevel Bruno & Vencatachellum Désiré, 2009. "R&D Delegation in a Duopoly with Spillovers," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 9(1), pages 1-42, December.
    7. Matsushima, Noriaki & Shinohara, Ryusuke, 2014. "What factors determine the number of trading partners?," Journal of Economic Behavior & Organization, Elsevier, vol. 106(C), pages 428-441.
    8. Markus Reisinger & Tim Paul Thomes, 2017. "Manufacturer collusion: Strategic implications of the channel structure," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 26(4), pages 923-954, December.
    9. Graham Mallard, 2014. "Static Common Agency And Political Influence: An Evaluative Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 28(1), pages 17-35, February.
    10. Fiocco, Raffaele, 2016. "The strategic value of partial vertical integration," European Economic Review, Elsevier, vol. 89(C), pages 284-302.
    11. Attar, Andrea & Campioni, Eloisa & Piaser, Gwenaël, 2015. "On Competing Mechanisms under Exclusive Competition," TSE Working Papers 15-609, Toulouse School of Economics (TSE).
    12. Salvatore Piccolo & Jeanine Miklós-Thal, 2012. "Colluding through suppliers," RAND Journal of Economics, RAND Corporation, vol. 43(3), pages 492-513, September.
    13. Hongbin Cai & Walter Cont, 2004. "Agency Problems and Commitment in Delegated Bargaining," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 13(4), pages 703-729, December.
    14. Osano, Hiroshi, 1998. "Moral hazard and renegotiation in multi-agent incentive contracts when each agent makes a renegotiation offer," Journal of Economic Behavior & Organization, Elsevier, vol. 37(2), pages 207-230, October.
    15. Esther Gal-Or & Mordechai Gal-Or, 2005. "Customized Advertising via a Common Media Distributor," Marketing Science, INFORMS, vol. 24(2), pages 241-253, July.
    16. Walter A Cont, 2001. "Essays on Contract Design: Delegation and Agency Problems, and Monitoring Under Collusion," Levine's Working Paper Archive 625018000000000122, David K. Levine.
    17. Cecile Aubert & Jerome Pouyet, 2000. "Collusion Under Asymmetric Information and Institutional Incompleteness," Econometric Society World Congress 2000 Contributed Papers 0806, Econometric Society.

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