Market Participation in Delegated and Intrinsic Common-Agency Games

We study how competition in nonlinear pricing between two principals (sellers) affects market participation by a privately informed agent (consumer). When participation is restricted to all or nothing (intrinsic agency), the agent must choose between both principals' contracts and selecting her outside option. When the agent is afforded the additional possibilities of choosing only one contract (delegated agency), competition is more intense. The two games have distinct predictions for participation. Intrinsic agency always induces more distortion in participation relative to the monopoly outcome, and equilibrium allocations are discontinuous for the marginal consumer. Under delegated agency, relative to monopoly, market participation increases (respectively, decreases) when contracting variables are substitutes (respectively, complements) on the intensive margin. Equilibrium allocations are continuous for the marginal consumer and the range of product offerings is identical to both the first-best and the monopoly outcome. Copyright (c) 2009, RAND.

[1]  Raghuram Iyengar,et al.  Nonlinear pricing , 2022 .

[2]  Aloisio Araujo,et al.  Adverse Selection Problems Without the Spence-Mirrlees Condition , 2010, J. Econ. Theory.

[3]  David Martimort,et al.  Selecting equilibria in common agency games , 2009, J. Econ. Theory.

[4]  Lars Stole,et al.  Price Discrimination in Competitive Environments , 2007 .

[5]  Lars Stole.  Price Discrimination and Competition , 2007 .

[6]  David Martimort,et al.  Advances in Economics and Econometrics: Multi-Contracting Mechanism Design , 2006 .

[7]  Giacomo Calzolari.  Incentive Regulation of Multinational Enterprises , 2004 .

[8]  Jean-Charles Rochet,et al.  Nonlinear Pricing with Random Participation , 2002 .

[9]  Mark Armstrong,et al.  Competitive price discrimination , 2001 .

[10]  D. Martimort,et al.  The Revelation and Delegation Principles in Common Agency Games , 2001, SSRN Electronic Journal.

[11]  D. Martimort,et al.  Contractual Externalities and Common Agency Equilibria , 2001, SSRN Electronic Journal.

[12]  Didier Laussel,et al.  Conflict and Cooperation: The Structure of Equilibrium Payoffs in Common Agency , 2001, J. Econ. Theory.

[13]  Bruno Jullien,et al.  Participation Constraints in Adverse Selection Models , 2000, J. Econ. Theory.

[14]  Petter Osmundsen,et al.  Strategic Tax Competition; Implications of National Ownership , 2000, SSRN Electronic Journal.

[15]  Carlo Scarpa,et al.  Non-Intrinsic Common Agency , 1999 .

[16]  C. Mezzetti.  Common Agency with Horizontally Differentiated Principals , 1997 .

[17]  Competition between asymmetrically informed principals , 1997 .

[18]  David Martimort,et al.  Exclusive Dealing, Common Agency, and Multiprincipals Incentive Theory , 1996 .

[19]  Lars Stole,et al.  Nonlinear Pricing and Oligopoly , 1995 .

[20]  Trond E. Olsen,et al.  Intertemporal common agency and organizational design: How much decentralization? , 1995 .

[21]  Giovanni Maggi,et al.  On Countervailing Incentives , 1995 .

[22]  David Martimort,et al.  Competition under Nonlinear Pricing , 1994 .

[23]  Trond E. Olsen,et al.  The Ratchet Effect in Common Agency: Implications for Regulation and Privatization , 1993 .

[24]  J. Laffont,et al.  A Theory of Incentives in Procurement and Regulation , 1993 .

[25]  David Martimort.  Multi-principaux avec anti-selection , 1992 .

[26]  Tracy R. Lewis,et al.  Countervailing incentives in agency problems , 1989 .

[27]  Tracy R. Lewis,et al.  Inflexible Rules in Incentive Problems , 1989 .

[28]  Knut Sydsæter,et al.  Optimal control theory with economic applications , 1987 .

[29]  M. Whinston,et al.  Menu Auctions, Resource Allocation, and Economic Influence , 1986 .

[30]  E. Maskin,et al.  Monopoly with Incomplete Information , 1984 .

[31]  Roger B. Myerson,et al.  Optimal Auction Design , 1981, Math. Oper. Res..

[32]  S. Rosen,et al.  Monopoly and product quality , 1978 .