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.
- Dirk Bergemann & Juuso Valimaki, 1998.
"Dynamic Common Agency,"
1259, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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"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.
- Dixit, Avinash & Grossman, Gene M. & Helpman, Elhanan, 1997. "Common Agency and Coordination: General Theory and Application to Government Policy Making," Scholarly Articles 3450061, Harvard University Department of Economics.
- 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.
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