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Sequential Contracting with Multiple Principals

Author

Listed:
  • Giacomo Calzolari
  • Alessandro Pavan

Abstract

This paper considers dynamic games in which multiple principals contract sequentially and non-cooperatively with the same agent. We first show that when contracting is private, i.e. when downstream principals observe neither the mechanisms offered upstream nor the decisions taken in these mechanisms, then all PBE outcomes can be characterized through pure-strategy profiles in which the principals offer menus of contracts and delegate to the agent the choice of the contractual terms. We then show that, in most cases of interest for applications, the characterization of the equilibrium outcomes is further facilitated by the fact that the principals can be restricted to offer incentive-compatible extended direct mechanisms in which the agent reports the endogenous payoff-relevant decisions contracted upstream in addition to his exogenous private information. Finally we show how the aforementioned results must be adjusted to accommodate alternative assumptions about the observability of upstream histories and/or the timing of contracting examined in the literature.

Suggested Citation

  • Giacomo Calzolari & Alessandro Pavan, 2008. "Sequential Contracting with Multiple Principals," Discussion Papers 1499, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  • Handle: RePEc:nwu:cmsems:1499
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Han, Seungjin, 2014. "Implicit collusion in non-exclusive contracting under adverse selection," Journal of Economic Behavior & Organization, Elsevier, vol. 99(C), pages 85-95.
    2. Graham Mallard, 2014. "Static Common Agency And Political Influence: An Evaluative Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 28(1), pages 17-35, February.
    3. Krasteva, Silvana & Yildirim, Huseyin, 2012. "On the role of confidentiality and deadlines in bilateral negotiations," Games and Economic Behavior, Elsevier, vol. 75(2), pages 714-730.
    4. Salvatore Piccolo & Giovanni W. Puopolo & Luis Vasconcelos, 2016. "Non-Exclusive Financial Advice," Review of Finance, European Finance Association, vol. 20(6), pages 2079-2123.
    5. Calzolari, Giacomo & Pavan, Alessandro, 2008. "On the use of menus in sequential common agency," Games and Economic Behavior, Elsevier, vol. 64(1), pages 329-334, September.
    6. Alessandro Acquisti & Curtis Taylor & Liad Wagman, 2016. "The Economics of Privacy," Journal of Economic Literature, American Economic Association, vol. 54(2), pages 442-492, June.
    7. Giacomo Calzolari & Carlo Scarpa, 2016. "Conglomerates And Regulation," Economic Inquiry, Western Economic Association International, vol. 54(3), pages 1648-1669, July.
    8. repec:oup:jleorg:v:33:y:2017:i:3:p:475-506. is not listed on IDEAS
    9. Ghosh, Sambuddha & Han, Seungjin, 2012. "Repeated Contracting in Decentralised Markets," Microeconomics.ca working papers seungjin_han-2012-12, Vancouver School of Economics, revised 02 May 2013.
    10. Peters, Michael, 2015. "Reciprocal contracting," Journal of Economic Theory, Elsevier, vol. 158(PA), pages 102-126.
    11. Peters, Michael, 2014. "Competing Mechanisms," Microeconomics.ca working papers michael_peters-2014-7, Vancouver School of Economics, revised 19 Feb 2014.

    More about this item

    Keywords

    Sequential common agency; mechanism design; contracts; endogenous types;

    JEL classification:

    • D89 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Other
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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