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Games with Externalities and Delegation to a Common Agent

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  • Emanuele Gerratana

    () (Department of Economics, Koç University)

Abstract

I present a model in which the players of a game have the option to delegate parts of their strategies to a third party who has an interest in the outcome of the game. I analyze whether the game with delegation to a common agent improves over the equilibrium of the original game. This paper contributes to the literature on private common agency and to the failure of the revelation principle with multiple principals. One contribution of this paper is the characterization of the complete set of equilibrium outcomes for the game with delegation, including the asymmetric outcomes. I also provide an answer to the question whether the results of the existing models of private common agency are robust to mixed strategy deviations and shed light on the persistence of the failure of revelation principle.

Suggested Citation

  • Emanuele Gerratana, 2007. "Games with Externalities and Delegation to a Common Agent," Koç University-TUSIAD Economic Research Forum Working Papers 0710, Koc University-TUSIAD Economic Research Forum.
  • Handle: RePEc:koc:wpaper:0710
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    File URL: http://eaf.ku.edu.tr/sites/eaf.ku.edu.tr/files/erf_wp_0710.pdf
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    Keywords

    Common Agency Games; Delegation; Revelation Principle; Games with Externalities.;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

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