Truthful Revelation Mechanisms for Simultaneous Common Agency Games

Abstract

This paper considers games in which multiple principals contract simultaneously and noncooperatively with the same agent. We introduce a new class of revelation mechanisms which, although they do not always permit a complete equilibrium characterization, do facilitate the characterization of the equilibrium outcomes that are typically of interest in applications. We then show how these mechanisms can be put to work in applications such as menu auctions, competition in nonlinear tariffs, and moral hazard settings. Lastly, we show how one can enrich the revelation mechanisms, albeit at a cost of an increase in complexity, to characterize all possible equilibrium outcomes, including those sustained by non-Markov strategies and/or mixed-strategy profiles.

Keywords: Mechanism design, contracts, revelation principle, menus, endogenous payoff-relevant information

JEL Classification: D89, C72