Multiprincipals multiagents incentive design

Date
2001
Authors
Kerschbamer, R.
Koray, S.
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Source Title
Review of Economic Design
Print ISSN
1434-4742
Electronic ISSN
1434-4750
Publisher
Springer
Volume
6
Issue
1
Pages
5 - 40
Language
English
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Abstract

This paper studies a simple setting in which the contractual arrangements which determine the incentives for agents are not designed by a single central planner, but are themselves the outcome of a game among multiple non-cooperatively acting principals. The notion of an Epsilon Contracting Equilibrium is introduced to predict the outcome of the contract-design game among principals. Symmetric pure strategy Epsilon Contracting Equlibria may not exist in perfectly symmetric environments. In a symmetric Epsilon Contracting Equilibrium in mixed strategies coordination failure may lead to a suboptimal institutional network in which the agents "cheat" their principals. © Springer-Verlag 2001.

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