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Common Agency Equilibria with Discrete Mechanisms and Discrete Types

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  • David Martimort
  • Lars Stole

Abstract

This paper characterizes the equilibrium sets of an intrinsic common agency game with discrete types and direct revelation mechanisms. After presenting a general algorithm to find the pure-strategy equilibria of this game, we use it to characterize these equilibria when the two principals control activities which are complements in the agent’s objective function. Some of those equilibria may entail allocative inefficiency. For the case of substitutes, we demonstrate non-existence of such equilibria with direct mechanisms, but existence may be obtained with indirect mechanisms. Finally, we relax the equilibrium concept and analyze quasi-equilibria. We show that existence is then guaranteed and characterize the corresponding allocations.

Suggested Citation

  • David Martimort & Lars Stole, 2001. "Common Agency Equilibria with Discrete Mechanisms and Discrete Types," CESifo Working Paper Series 572, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_572
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    File URL: http://www.cesifo-group.de/DocDL/cesifo_wp572.pdf
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    References listed on IDEAS

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    1. David Martimort, 1996. "Exclusive Dealing, Common Agency, and Multiprincipals Incentive Theory," RAND Journal of Economics, The RAND Corporation, pages 1-19.
    2. Peters, Michael, 2001. "Common Agency and the Revelation Principle," Econometrica, Econometric Society, vol. 69(5), pages 1349-1372, September.
    3. David Martimort & Lars Stole, 2002. "The Revelation and Delegation Principles in Common Agency Games," Econometrica, Econometric Society, vol. 70(4), pages 1659-1673, July.
    4. Myerson, Roger B., 1982. "Optimal coordination mechanisms in generalized principal-agent problems," Journal of Mathematical Economics, Elsevier, vol. 10(1), pages 67-81, June.
    5. Partha Dasgupta & Eric Maskin, 1986. "The Existence of Equilibrium in Discontinuous Economic Games, II: Applications," Review of Economic Studies, Oxford University Press, vol. 53(1), pages 27-41.
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    Cited by:

    1. Hans Hvide & Tore Leite, 2010. "Optimal debt contracts under costly enforcement," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 44(1), pages 149-165, July.
    2. Hvide, Hans K., 2005. "Optimal contracts under imperfect enforcement revisited," Discussion Papers 2005/4, Norwegian School of Economics, Department of Business and Management Science.

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