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Strategic Consensus

  • Aidt, T.S.
  • Dutta, J.

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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File URL: http://www.econ.cam.ac.uk/research/repec/cam/pdf/cwpe0403.pdf
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Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0403.

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Length: 22
Date of creation: Jan 2004
Date of revision:
Handle: RePEc:cam:camdae:0403
Note: PE
Contact details of provider: Web page: http://www.econ.cam.ac.uk/index.htm

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  1. 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.
  2. 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.
  3. John Ferejohn, 1986. "Incumbent performance and electoral control," Public Choice, Springer, vol. 50(1), pages 5-25, January.
  4. Bernheim, B Douglas & Whinston, Michael D, 1986. "Menu Auctions, Resource Allocation, and Economic Influence," The Quarterly Journal of Economics, MIT Press, vol. 101(1), pages 1-31, February.
  5. Bergemann, Dirk & Valimaki, Juuso, 2003. "Dynamic common agency," Journal of Economic Theory, Elsevier, vol. 111(1), pages 23-48, July.
  6. Banks, Jeffrey S. & Sundaram, Rangarajan K., 1998. "Optimal Retention in Agency Problems," Journal of Economic Theory, Elsevier, vol. 82(2), pages 293-323, October.
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