Intra-firm bargaining and learning in a market equilibrium
This paper introduces an agency relationship into a dynamic game with informational externalities. Two principals bargain with their respective agents about the production cost which is the private information of the agents and is correlated between them. We find that the agency relationship creates an incentive for simultaneous production, even if this involves an inefficient delay. As the commitment power of the principals decreases, this incentive becomes stronger. When principals compete, the effect of competition is decomposed into two parts. Inter-period competition (from past and future actions) pushes principals towards simultaneous actions, while intra-period competition (from concurrent actions) does the opposite.
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- R. Gary-Bobo & Y. Spiegel, 2003.
"Optimal state-contingent regulation under limited liability,"
THEMA Working Papers
2003-09, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
- Robert Gary‐Bobo & Yossi Spiegel, 2006. "Optimal state‐contingent regulation under limited liability," RAND Journal of Economics, RAND Corporation, vol. 37(2), pages 431-448, 06.
- Gary-Bobo, Robert J. & Spiegel, Yossi, 2003. "Optimal State-Contingent Regulation under Limited Liability," CEPR Discussion Papers 3920, C.E.P.R. Discussion Papers.
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