Contracting with Externalities
The paper studies inefficiencies arising in contracting between one principal and N agents when the utility of each agent depends on all agents' trades with the principal. When the principal commits to a set of publicly observable bilateral contract offers, the arising inefficiency is due entirely to the externalities imposed on non-signers. In contrast, when the principal's offers are privately observed, the distortion is due to the externalities given agents' equilibrium trades. Comparison of the two externalities determines the relative efficiency of the two contracting regimes. In both cases, we show that when N is large, each agent can be treated as non-pivotal, provided that appropriate continuity assumptions are satisfied.
|Date of creation:||01 Dec 1997|
|Contact details of provider:|| Postal: University of California at Berkeley, Berkeley, CA USA|
Web page: http://www.haas.berkeley.edu/groups/iber/wps/econwp.html
More information through EDIRC
|Order Information:|| Postal: IBER, F502 Haas Building, University of California, Berkeley CA 94720-1922|
When requesting a correction, please mention this item's handle: RePEc:ucb:calbwp:97-259. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum)
If references are entirely missing, you can add them using this form.