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Delegation Principle for Multi-agency Games under Ex Post Equilibrium

  • Yu Chen

    ()

    (Nanjing University)

  • Zhenhua Wu

    ()

    (Nanjing University)

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    We explore the strategic equivalence of the delegated menu contracting procedure in pure-strategy multi-agency games under ex post equilibrium. Our model setup permits "full-blown interdependence," including information externality, contract externality, correlated types, and primitive constraints across the contracts for different agents. Our delegation principle identifies that (optimal) ex post menu design is strategically equivalent to (optimal) bilateral ex post mechanism design, which simplifies collective ex post mechanism design by ignoring relative information evaluation. Moreover, one can restrict attention to product menu design problems out of general menu design problems if the contract constraint sets have product structures. Our results still hold if we include individual rationality or any degenerated form of "full-blown interdependence."

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    File URL: http://www.iub.edu/~caepr/RePEc/PDF/2012/CAEPR2012-008.pdf
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    Paper provided by Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington in its series Caepr Working Papers with number 2012-008.

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    Length: 26 pages
    Date of creation: Nov 2012
    Date of revision:
    Handle: RePEc:inu:caeprp:2012008
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    1. Frank H. Page & Paulo Klinger Monteiro, 2002. "Three principles of competitive nonlinear pricing," Game Theory and Information 0204001, EconWPA.
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    9. Giammarino, Ronald M & Lewis, Tracy R & Sappington, David E M, 1993. " An Incentive Approach to Banking Regulation," Journal of Finance, American Finance Association, vol. 48(4), pages 1523-42, September.
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    15. Richard P. McLean & Andrew Postlewaite, 2002. "Implementation with Interdependent Valuations, Second Version," PIER Working Paper Archive 13-005, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 28 Jan 2013.
    16. Jeffrey C. Ely & Kim-Sau Chung, 2002. "Ex-Post Incentive Compatible Mechanism Design," Discussion Papers 1339, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    17. Sushil Bikhchandani & Shurojit Chatterji & Ron Lavi & Ahuva Mu'alem & Noam Nisan & Arunava Sen, 2006. "Weak Monotonicity Characterizes Deterministic Dominant-Strategy Implementation," Econometrica, Econometric Society, vol. 74(4), pages 1109-1132, 07.
    18. Page, Frank H, Jr, 1992. "Mechanism Design for General Screening Problems with Moral Hazard," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 2(2), pages 265-81, April.
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