Common Agency

by: Douglas B Bernheim, Michael D Whinston

Econometrica, Vol. 54, No. 4. (1986), pp. 923-942.

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Abstract

We extend the principal-agent framework with risk-neutral principals to situations in which several principals simultaneously and independently attempt to influence a common agent. We show that implementation is, in the aggregate, always efficient (cost-minimizing), and that noncooperative behavior induces an efficient (potentially second-best) action choice if and only if collusion among the principals would implement the first-best action at the first-best level of cost. We also investigate the existence of equilibria, the distribution of net rewards among principals, the characteristics of actions chosen in inefficient equilibria, and potential institutional remedies for welfare losses induced by noncooperative behavior.

@article{citeulike:685473, abstract = {We extend the principal-agent framework with risk-neutral principals to situations in which several principals simultaneously and independently attempt to influence a common agent. We show that implementation is, in the aggregate, always efficient (cost-minimizing), and that noncooperative behavior induces an efficient (potentially second-best) action choice if and only if collusion among the principals would implement the first-best action at the first-best level of cost. We also investigate the existence of equilibria, the distribution of net rewards among principals, the characteristics of actions chosen in inefficient equilibria, and potential institutional remedies for welfare losses induced by noncooperative behavior.}, author = {Bernheim, Douglas B. and Whinston, Michael D. }, citeulike-article-id = {685473}, doi = {10.2307/1912844}, journal = {Econometrica}, keywords = {agency, contract, microeconomic\_theory}, number = {4}, pages = {923--942}, posted-at = {2008-07-01 15:02:56}, priority = {4}, title = {Common Agency}, url = {http://dx.doi.org/10.2307/1912844}, volume = {54}, year = {1986} }

RIS record

TY - JOUR ID - citeulike:685473 L3 - citeulike-article-id:685473 TI - Common Agency JF - Econometrica VL - 54 IS - 4 SP - 923 EP - 942 N2 - We extend the principal-agent framework with risk-neutral principals to situations in which several principals simultaneously and independently attempt to influence a common agent. We show that implementation is, in the aggregate, always efficient (cost-minimizing), and that noncooperative behavior induces an efficient (potentially second-best) action choice if and only if collusion among the principals would implement the first-best action at the first-best level of cost. We also investigate the existence of equilibria, the distribution of net rewards among principals, the characteristics of actions chosen in inefficient equilibria, and potential institutional remedies for welfare losses induced by noncooperative behavior. KW - agency KW - contract KW - microeconomic_theory AU - Bernheim, Douglas AU - Whinston, Michael PY - 1986/// UR - http://dx.doi.org/10.2307/1912844 ER -

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