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Contractible Contracts in Common Agency Problems

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  • Balázs Szentes

Abstract

This article analyses contractual situations between many principals and many agents. The agents have private information, and the principals take actions. Principals have the ability to contract not only on the reports of the agents but also on the contracts offered by other principals. Contracts are required to be representable in a formal language. The main result of the article is a characterization of the allocations that can be implemented as equilibria in our contracting game. We then restrict attention to exclusive-contracting environments, in which the agent may select the contract of at most one principal. In this setting, our characterization result implies that principals can collude to implement the monopolist outcome. Finally, in general, equilibrium contracts turn out to be incomplete. That is, a contract will restrict the action space of a principal but will not necessarily determine a single action.

Suggested Citation

  • Balázs Szentes, 2015. "Contractible Contracts in Common Agency Problems," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 82(1), pages 391-422.
    • Handle: RePEc:oup:restud:v:82:y:2015:i:1:p:391-422
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    File URL: http://hdl.handle.net/10.1093/restud/rdu025
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    Cited by:

    1. Perrin Lefebvre & David Martimort, 2022. "Delegation, capture and endogenous information structures," Journal of Theoretical Politics, , vol. 34(3), pages 357-414, July.
    2. Attar, Andrea & Campioni, Eloisa & Piaser, Gwenaël, 2018. "On competing mechanisms under exclusive competition," Games and Economic Behavior, Elsevier, vol. 111(C), pages 1-15.
    3. Attar, Andrea & Campioni, Eloisa & Piaser, Gwenaël, 2019. "Private communication in competing mechanism games," Journal of Economic Theory, Elsevier, vol. 183(C), pages 258-283.
    4. Martimort, David & Semenov, Aggey & Stole, Lars A., 2018. "A complete characterization of equilibria in an intrinsic common agency screening game," Theoretical Economics, Econometric Society, vol. 13(3), September.
    5. Andrea Attar & Eloisa Campioni & Thomas Mariotti & Alessandro Pavan, 2021. "Keeping the Agents in the Dark: Private Disclosures in Competing Mechanisms," CEIS Research Paper 519, Tor Vergata University, CEIS, revised 21 Oct 2021.
    6. Attar, Andrea & Campioni, Eloisa & Mariotti, Thomas & Piaser, Gwenaël, 2021. "Competing mechanisms and folk theorems: Two examples," Games and Economic Behavior, Elsevier, vol. 125(C), pages 79-93.
    7. Wanda Mimra & Achim Wambach, 2019. "Contract withdrawals and equilibrium in competitive markets with adverse selection," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 67(4), pages 875-907, June.
    8. Andrea Attar & Catherine Casamatta & Arnold Chassagnon & Jean-Paul Décamps, 2019. "Multiple Lenders, Strategic Default, and Covenants," American Economic Journal: Microeconomics, American Economic Association, vol. 11(2), pages 98-130, May.
    9. Seungjin Han, 2018. "Neutralized Competition," Department of Economics Working Papers 2018-11, McMaster University.
    10. Martimort, David & Stole, Lars, 2024. "Menu Auctions Under Asymmetric Information," TSE Working Papers 24-1592, Toulouse School of Economics (TSE).
    11. Green, Daniel & Liu, Ernest, 2021. "A dynamic theory of multiple borrowing," Journal of Financial Economics, Elsevier, vol. 139(2), pages 389-404.
    12. David Martimort & Aggey Semenov & Lars Stole, 2016. "A Complete Characterization of Equilibria in Common Agency Screening Games," Working Papers 1618E, University of Ottawa, Department of Economics.
    13. Juan I. Block & David K. Levine, 2016. "Codes of conduct, private information and repeated games," International Journal of Game Theory, Springer;Game Theory Society, vol. 45(4), pages 971-984, November.
    14. Seungjin Han, 2021. "Robust Equilibria in General Competing Mechanism Games," Papers 2109.13177, arXiv.org, revised Aug 2023.
    15. Perrin Lefebvre & David Martimort, 2023. "Reform for Sale : A Common Agency Model with Moral Hazard Frictions," Post-Print hal-04234620, HAL.
    16. Lavi, Ron & Shamash, Elisheva S., 2022. "Principal-agent VCG contracts," Journal of Economic Theory, Elsevier, vol. 201(C).

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