Robust Contracts in Common Agency

We consider a game between several principals and a common agent, where principals know only a subset of the agent’s available actions. Principals demand robustness and evaluate contracts on a worst-case basis. This robust approach allows for a crisp characterization of the equilibrium contracts and payoffs and provides a novel proof of equilibrium existence in common agency by constructing a pseudo-potential for the game. Robust contracts make explicit how the efficiency of the equilibrium outcome relative to collusion among principals depends on the principals’ ability to extract payments from the agent.