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Rivalry among agents seeking large budgets

Author

Listed:
  • Kimiko Terai

    (Keio University, Tokyo, Japan)

  • Amihai Glazer

    (University of California, Irvine, USA)

Abstract

An agent competing for resources from a principal may benefit from having the principal believe that the agent shares his preferences, whereas the principal may prefer that agents reveal their types, inducing a separating equilibrium. Such incentives are explored in a model with a principal who sets a budget in two separate periods, and two different agents allocate that budget among services. In the second period, the principal allocates a larger budget to the agent that he believes is more likely to share his preferences. In the first period, each agent may behave strategically, spending more on the service the principal prefers, thereby hiding the agent’s type; this benefits the principal in the current period, but hurts him in the future because he does not know which agent would spend in the way he prefers. The principal may induce separation by giving the agents a large budget in the initial period, or by hiding his preferences from them.

Suggested Citation

  • Kimiko Terai & Amihai Glazer, 2018. "Rivalry among agents seeking large budgets," Journal of Theoretical Politics, , vol. 30(4), pages 388-409, October.
    • Handle: RePEc:sae:jothpo:v:30:y:2018:i:4:p:388-409
    DOI: 10.1177/0951629818791029
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    Cited by:

    1. Torun Dewan & John W Patty, 2018. "Editors’ Introduction to JTP issue 30.4," Journal of Theoretical Politics, , vol. 30(4), pages 385-387, October.

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