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Endogenous Games and Mechanisms: Side Payments Among Players

  • Wilkie, Simon
  • Jackson, Matthew O.

We characterize the outcomes of games when players may make binding offers of strategy contingent side payments before the game is played. This does not always lead to efficient outcomes, despite complete information and costless contracting. The characterizations are illustrated in a series of examples, including voluntary contribution public good games, Cournot and Bertrand oligopoly, principal-agent problems, and commons games, among others.

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Paper provided by California Institute of Technology, Division of the Humanities and Social Sciences in its series Working Papers with number 1150.

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Date of creation: Nov 2002
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Publication status: Published: published in Review of Economic Studies, 2005, V. 72, pp. 543-566.
Handle: RePEc:clt:sswopa:1150
Contact details of provider: Postal: Working Paper Assistant, Division of the Humanities and Social Sciences, 228-77, Caltech, Pasadena CA 91125
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Web page: http://www.hss.caltech.edu/ss
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  1. Andrea Prat & Aldo Rustichini, 2003. "Games Played Through Agents," Econometrica, Econometric Society, vol. 71(4), pages 989-1026, 07.
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  10. (*), Kai A. Konrad & Wolfgang Buchholz & Kjell Erik Lommerud, 1997. "Stackelberg leadership and transfers in private provision of public goods," Review of Economic Design, Springer, vol. 3(1), pages 29-43.
  11. Kalai, Ehud, 1981. "Preplay negotiations and the prisoner's dilemma," Mathematical Social Sciences, Elsevier, vol. 1(4), pages 375-379, August.
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  17. Guttman, Joel M, 1978. "Understanding Collective Action: Matching Behavior," American Economic Review, American Economic Association, vol. 68(2), pages 251-55, May.
  18. McAfee, R Preston, 1993. "Mechanism Design by Competing Sellers," Econometrica, Econometric Society, vol. 61(6), pages 1281-1312, November.
  19. Aghion, Philippe & Bolton, Patrick, 1987. "Contracts as a Barrier to Entry," American Economic Review, American Economic Association, vol. 77(3), pages 388-401, June.
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