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Contracting on Networks

Author

Listed:
  • Mohamed Belhaj

    (Centrale Marseille (Aix-Marseille School of Economics), CNRS and EHESS)

  • Frédéric Deroian

    (Aix-Marseille University (Aix-Marseille School of Economics), CNRS and EHESS)

Abstract

A principal offers bilateral contracts to a set of agents organized in a network conveying synergies, in a context where agents' efforts are observable and where the principal's objective increases with the sum of efforts. We characterize optimal contracts as a function of agents' positions on the network. The analysis shows that contract enforceability is key to understand optimality. We also examine linear contracting and we analyze the situation where the principal is constrained to contract with a single agent on the network. Last, we extend this setting to network entry.

Suggested Citation

  • Mohamed Belhaj & Frédéric Deroian, 2015. "Contracting on Networks," AMSE Working Papers 1501, Aix-Marseille School of Economics, France.
    • Handle: RePEc:aim:wpaimx:1501
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    References listed on IDEAS

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    Cited by:

    1. Belhaj, Mohamed & Deroïan, Frédéric, 2018. "Targeting the key player: An incentive-based approach," Journal of Mathematical Economics, Elsevier, vol. 79(C), pages 57-64.

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    More about this item

    Keywords

    optimal contracting; multi-agency; Network; Strategic Complementarity; enforceability;
    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

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