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On multiple-principal multiple-agent models of moral hazard

Author

Listed:
  • Andrea Attar
  • Eloisa Campioni
  • Gwenaël Piaser

    () (Luxembourg School of Finance, University of Luxembourg)

  • Uday Rajan

Abstract

In multiple-principal multiple-agent models of moral hazard, we provide sufficient conditions for the outcomes of pure-strategy equilibria in direct mechanisms to be preserved when principals can offer indirect communication schemes. The conditions include strong robustness in the direct mechanism game, as developed in the literature on competing mechanisms by Peters (2001) and Han (2007a), and a no-correlation property we define. We provide a rationale for restricting attention to take-it or leave-it offers, as is typically done in applications. We show via examples that it is necessary to allow direct mechanisms to be stochastic and to include private recommendations from principals to agents to preserve the corresponding equilibrium outcomes, and that the no-correlation condition is tight.

Suggested Citation

  • Andrea Attar & Eloisa Campioni & Gwenaël Piaser & Uday Rajan, 2007. "On multiple-principal multiple-agent models of moral hazard," LSF Research Working Paper Series 07-01, Luxembourg School of Finance, University of Luxembourg.
  • Handle: RePEc:crf:wpaper:07-01
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    File URL: http://www.lsf.lu/eng/content/download/485/2648/file/07-01.pdf
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    References listed on IDEAS

    as
    1. Peters, Michael, 2001. "Common Agency and the Revelation Principle," Econometrica, Econometric Society, vol. 69(5), pages 1349-1372, September.
    2. David Martimort & Lars Stole, 2002. "The Revelation and Delegation Principles in Common Agency Games," Econometrica, Econometric Society, vol. 70(4), pages 1659-1673, July.
    3. Aumann, Robert J, 1987. "Correlated Equilibrium as an Expression of Bayesian Rationality," Econometrica, Econometric Society, vol. 55(1), pages 1-18, January.
    4. Han, Seungjin, 2007. "Strongly robust equilibrium and competing-mechanism games," Journal of Economic Theory, Elsevier, vol. 137(1), pages 610-626, November.
    5. Myerson, Roger B., 1982. "Optimal coordination mechanisms in generalized principal-agent problems," Journal of Mathematical Economics, Elsevier, vol. 10(1), pages 67-81, June.
    6. Epstein, Larry G. & Peters, Michael, 1999. "A Revelation Principle for Competing Mechanisms," Journal of Economic Theory, Elsevier, vol. 88(1), pages 119-160, September.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Gwenael Piaser, 2005. "Stochastic and deterministic menus in common agency games," Economics Bulletin, AccessEcon, vol. 4(11), pages 1-6.
    2. Andrea Attar & Eloisa Campioni & Gwenaël Piaser & Uday Rajan, 2012. "Competing mechanism games of moral hazard: communication and robustness," Review of Economic Design, Springer;Society for Economic Design, vol. 16(4), pages 283-296, December.
    3. repec:ipg:wpaper:2014-049 is not listed on IDEAS
    4. Attar, Andrea & Campioni, Eloisa & Piaser, Gwenaël, 2015. "On Competing Mechanisms under Exclusive Competition," TSE Working Papers 15-609, Toulouse School of Economics (TSE).
    5. Nedelchev, Miroslav, 2014. "Decrease of ‘Principal-Principal’ Conflicts," MPRA Paper 64541, University Library of Munich, Germany.
    6. Andrea Attar & Eloisa Campioni & Gwenael Piaser, 2011. "Information Revelation in Competing Mechanism Games," CEIS Research Paper 205, Tor Vergata University, CEIS, revised 04 Jul 2011.
    7. Attar, Andrea & Campioni, Eloisa & Piaser, Gwenaël, 2017. "On Private Communication in Competing Mechanism Games," TSE Working Papers 17-863, Toulouse School of Economics (TSE).
    8. Attar, Andrea & Campioni, Eloisa & Piaser, Gwenaël, 2013. "Two-sided communication in competing mechanism games," Journal of Mathematical Economics, Elsevier, vol. 49(1), pages 62-70.
    9. repec:ebl:ecbull:v:4:y:2005:i:11:p:1-6 is not listed on IDEAS
    10. Gwenaël Piaser, 2014. "Incentive compatible mechanisms in multiprincipal multiagent games," Working Papers 2014-49, Department of Research, Ipag Business School.

    More about this item

    Keywords

    Moral hazard; multiple principal; multiple agent; direct mechanisms.;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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