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How to manage multiple interdepedent agents

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  • Pierre Fleckinger

    (CECO - Laboratoire d'économétrie de l'École polytechnique - X - École polytechnique - CNRS - Centre National de la Recherche Scientifique)

Abstract

We analyze a simple firm model in a principal multiagent framework under adverse selection. The firm's efficiency depends on the effort devoted to productive activities as well as on the fit between the divisions, for which costly coordination actions can be undertaken. The specificity of the model is that the hidden information may not be ranked objectively, as opposed to more standard models which assume the Spence-Mirrlees condition. This specificity ordinarily induces a non-monotous rent profile over the types and might lead to pooling. Nonetheless, a sufficient condition is given for the rents to be completely eliminated. It is related to the Principal's ability to create ''bayesian'' countervailing incentives.

Suggested Citation

  • Pierre Fleckinger, 2003. "How to manage multiple interdepedent agents," Working Papers hal-00242983, HAL.
  • Handle: RePEc:hal:wpaper:hal-00242983
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00242983
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    References listed on IDEAS

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    1. Itoh, Hideshi, 1992. "Cooperation in Hierarchical Organizations: An Incentive Perspective," Journal of Law, Economics, and Organization, Oxford University Press, vol. 8(2), pages 321-345, April.
    2. Itoh, Hideshi, 1991. "Incentives to Help in Multi-agent Situations," Econometrica, Econometric Society, vol. 59(3), pages 611-636, May.
    3. Choi, Yoon K., 1993. "Managerial incentive contracts with a production externality," Economics Letters, Elsevier, vol. 42(1), pages 37-42.
    4. Milgrom, Paul & Roberts, John, 1995. "Complementarities and fit strategy, structure, and organizational change in manufacturing," Journal of Accounting and Economics, Elsevier, vol. 19(2-3), pages 179-208, April.
    5. Demski, Joel S. & Sappington, David, 1984. "Optimal incentive contracts with multiple agents," Journal of Economic Theory, Elsevier, vol. 33(1), pages 152-171, June.
    6. Sappington, David & Demski, Joel S., 1983. "Multi-agent control in perfectly correlated environments," Economics Letters, Elsevier, vol. 13(4), pages 325-330.
    7. Lewis, Tracy R. & Sappington, David E. M., 1989. "Countervailing incentives in agency problems," Journal of Economic Theory, Elsevier, vol. 49(2), pages 294-313, December.
    8. Arrow, Kenneth J, 1985. "Informational Structure of the Firm," American Economic Review, American Economic Association, vol. 75(2), pages 303-307, May.
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