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Strategic Consensus

Author

Listed:
  • Aidt, T.S.
  • Dutta, J.

Abstract

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.

Suggested Citation

  • Aidt, T.S. & Dutta, J., 2004. "Strategic Consensus," Cambridge Working Papers in Economics 0403, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camdae:0403
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    Cited by:

    1. Toke S. Aidt & Jayasri Dutta, 2017. "Fiscal Federalism and Electoral Accountability," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 19(1), pages 38-58, February.
    2. 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.
    3. Dalibor Eterovic, 2009. "Policy Reform Under Electoral Uncertainty," Working Papers Central Bank of Chile 546, Central Bank of Chile.
    4. Aidt, T.S. & Dutta, J., 2008. "Electoral Uncertainty and Public Goods," Cambridge Working Papers in Economics 0843, Faculty of Economics, University of Cambridge.
    5. Toke S. Aidt & Jayasri Dutta, 2017. "Fiscal Federalism and Electoral Accountability," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 19(1), pages 38-58, February.

    More about this item

    Keywords

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    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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