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Weight-ranked divide-and-conquer contracts

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  • Chan, Lester T.

    (College of Business, Southern University of Science and Technology)

Abstract

This paper studies a large class of multi-agent contracting models with the property that agents' payoffs constitute a weighted potential game. Multiple equilibria arise due to agents' strategic interactions. I fully characterize a contracting scheme that is optimal for the principal for all equilibrium selection criteria that are more pessimistic than potential maximization. This scheme ranks agents in ascending order of their weights in the weighted potential game and then induces them to accept their offers in a dominance-solvable way, starting from the first agent. I apply the general results to networks, public goods/bads, and a class of binary-action applications.

Suggested Citation

  • Chan, Lester T., 0. "Weight-ranked divide-and-conquer contracts," Theoretical Economics, Econometric Society.
    • Handle: RePEc:the:publsh:5602
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Contracting with externalities; divide and conquer; potential games; networks; public goods;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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