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Common Agency with Horizontally Differentiated Principals

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  • Claudio Mezzetti

Abstract

I analyze a common agency relationship where the agent has private information about the difference in his value for two principals. When the principals independently offer incentive contracts, the agent specializes less than is socially efficient, but more than when they cooperate and choose the contract that maximizes their joint payoff. Under both arrangements the agent faces countervailing incentives. The pooling region of types receiving a flat fee is larger and the incentive pay of the remaining types is lower powered under cooperation than under independent contracting. The principals prefer independent contracting with a common agent to exclusive dealing.

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  • Claudio Mezzetti, 1997. "Common Agency with Horizontally Differentiated Principals," RAND Journal of Economics, The RAND Corporation, vol. 28(2), pages 323-345, Summer.
    • Handle: RePEc:rje:randje:v:28:y:1997:i:summer:p:323-345
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