Information Alliance in Common Agency

28 Pages Posted: 12 Aug 2024 Last revised: 23 Oct 2024

See all articles by Rafael Costa Lima

Rafael Costa Lima

Universidade Federal de Pernambuco (UFPE)

Humberto Moreira

Fundacao Getulio Vargas (FGV)

Alexander Rodivilov

Stevens Institute of Technology - School of Business

Dongsoo Shin

Santa Clara University - Leavey School of Business

Date Written: July 29, 2024

Abstract

We provide a new rationale for common agency. In our model, there are two independent projects each of which is owned by a principal. Under exclusive agency, each principal uses a different agent, whereas under common agency, the same agent is used for both principals. Each project can succeed or fail after its agent covertly exerts effort. According to our analysis, the principals under exclusive agency have no incentive to share their information, whereas under common agency, sharing information is each principal's dominant strategy. We show that, when information can be shared, common agency dominates exclusive agency.

Keywords: Information Sharing, Moral Hazard, Common Agency

JEL Classification: D82, D86, L23

Suggested Citation

Costa Lima, Rafael and Moreira, Humberto and Rodivilov, Alexander and Shin, Dongsoo, Information Alliance in Common Agency (July 29, 2024). Available at SSRN: https://ssrn.com/abstract=4910525

Rafael Costa Lima (Contact Author)

Universidade Federal de Pernambuco (UFPE) ( email )

Cidade Universitária
Recife, Pernambuco 50670-901
Brazil

Humberto Moreira

Fundacao Getulio Vargas (FGV) ( email )

R. Dr. Neto de Araujo 320 cj 1307
Rio de Janeiro, Rio de Janeiro 22250-900
Brazil

Alexander Rodivilov

Stevens Institute of Technology - School of Business ( email )

Hoboken, NJ 07030
United States
2066077479 (Phone)

HOME PAGE: http://rodivilov.weebly.com/

Dongsoo Shin

Santa Clara University - Leavey School of Business ( email )

500 El Camino Real
Santa Clara, CA California 95053
United States

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