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Repeated Contracting in Decentralised Markets

  • Ghosh, Sambuddha
  • Han, Seungjin

We consider a model where multiple principals repeatedly offer short-term contracts to three or more agents with private information. Under low discounting there exists a simple class of mechanisms that sustains all equilibrium allocations that could be generated by arbitrarily complex mechanisms. This equivalence result leads to a simple algorithm for computing equilibrium payoffs; this contrasts with the one-shot setting, where closed form expressions of such payoffs do not exist. Endogenous monitoring by agents weakens incentive compatibility relative to one-shot contracting; this lowers minmax values, expanding the set of equilibrium payoffs.

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Paper provided by Vancouver School of Economics in its series working papers with number seungjin_han-2012-12.

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Length: 54 pages
Date of creation: 04 Apr 2012
Date of revision: 02 May 2013
Handle: RePEc:ubc:pmicro:seungjin_han-2012-12
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  1. Bergemann, Dirk & Valimaki, Juuso, 2003. "Dynamic common agency," Journal of Economic Theory, Elsevier, vol. 111(1), pages 23-48, July.
  2. Han, Seungjin, 2004. "Menu Theorems for Bilateral Contracting," working papers han-04-01-29-10-05-13, Vancouver School of Economics, revised 29 Jan 2004.
  3. Pavan, Alessandro & Calzolari, Giacomo, 2009. "Sequential contracting with multiple principals," Journal of Economic Theory, Elsevier, vol. 144(2), pages 503-531, March.
  4. Michael Peters, 1999. "Common Agency and the Revelation Principle," Working Papers peters-99-01, University of Toronto, Department of Economics.
  5. Dirk Bergemann & Stephen Morris, 2003. "Robust Mechanism Design," Cowles Foundation Discussion Papers 1421R, Cowles Foundation for Research in Economics, Yale University, revised Apr 2004.
  6. David Martimort & Lars Stole, 2001. "The Revelation and Delegation Principles in Common Agency Games," CESifo Working Paper Series 575, CESifo Group Munich.
  7. MacLeod, W Bentley & Malcomson, James M, 1993. "Investments, Holdup, and the Form of Market Contracts," American Economic Review, American Economic Association, vol. 83(4), pages 811-37, September.
  8. Takuro Yamashita, 2010. "Mechanism Games With Multiple Principals and Three or More Agents," Econometrica, Econometric Society, vol. 78(2), pages 791-801, 03.
  9. Abreu, D. & Dutta, P.K. & Smith, L., 1992. "Folk Theorems for Repeated Games: A NEU Condition," Working papers 92-15, Massachusetts Institute of Technology (MIT), Department of Economics.
  10. McAfee, R Preston, 1993. "Mechanism Design by Competing Sellers," Econometrica, Econometric Society, vol. 61(6), pages 1281-1312, November.
  11. Ma, Ching-To, 1988. "Unique Implementation of Incentive Contracts with Many Agents," Review of Economic Studies, Wiley Blackwell, vol. 55(4), pages 555-72, October.
  12. Giacomo Calzolari & Alessandro Pavan, 2007. "Truthful Revelation Mechanisms for Simultaneous Common Agency Games," Discussion Papers 1458, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  13. Larry Epstein & Michael Peters, 1996. "A Revelation Principle For Competing Mechanisms," Working Papers peters-96-02, University of Toronto, Department of Economics.
  14. Matsushima, Hitoshi, 1988. "A new approach to the implementation problem," Journal of Economic Theory, Elsevier, vol. 45(1), pages 128-144, June.
  15. Andrea Attar & Thomas Mariotti & Francois Salanie, 2009. "Non-Exclusive Competition in the Market for Lemons," LERNA Working Papers 09.13.289, LERNA, University of Toulouse.
  16. Lee, J. & Sabourian, H., 2009. "Efficient Repeated Implementation," Cambridge Working Papers in Economics 0948, Faculty of Economics, University of Cambridge.
  17. Abreu, Dilip & Matsushima, Hitoshi, 1992. "Virtual Implementation in Iteratively Undominated Strategies: Complete Information," Econometrica, Econometric Society, vol. 60(5), pages 993-1008, September.
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