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Common Agency Equilibria with Discrete Mechanisms and Discrete Types

24 Pages Posted: 23 Oct 2001  

David Martimort

University of Toulouse 1 - Industrial Economic Institute (IDEI); CESifo (Center for Economic Studies and Ifo Institute)

Lars Stole

University of Chicago - Booth School of Business

Date Written: October 2001

Abstract

This paper characterizes the equilibrium sets of an intrinsic common agency game with discrete types and direct revelation mechanisms. After presenting a general algorithm to find the pure-strategy equilibria of this game, we use it to characterize these equilibria when the two principals control activities which are complements in the agent's objective function. Some of those equilibria may entail allocative inefficiency. For the case of substitutes, we demonstrate non-existence of such equilibria with direct mechanisms, but existence may be obtained with indirect mechanisms. Finally, we relax the equilibrium concept and analyze quasi-equilibria. We show that existence is then guaranteed and characterize the corresponding allocations.

JEL Classification: D82, L51

Suggested Citation

Martimort, David and Stole, Lars, Common Agency Equilibria with Discrete Mechanisms and Discrete Types (October 2001). CESifo Working Paper Series No. 572. Available at SSRN: https://ssrn.com/abstract=287115

David Martimort

University of Toulouse 1 - Industrial Economic Institute (IDEI) ( email )

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CESifo (Center for Economic Studies and Ifo Institute)

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Lars A. Stole (Contact Author)

University of Chicago - Booth School of Business ( email )

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Chicago, IL 60637
United States
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773-702-0458 (Fax)

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