Conflict and Cooperation: The Structure of Equilibrium Payoffs in Common Agency

Abstract This paper is a contribution to the theory of common agency initiated by B. D. Bernheim and M. D. Whinston (1986, Quart. J. Econ. 101 , 1–31). By common agency we mean the following: an agent decides upon an action which affects its well-being as well as the well-being of n other individuals (the principals), each of whom offers a menu of payments contingent on the action chosen. Under complete information Bernheim and Whinston prove the existence of an interesting subset of Nash equilibria they call truthful, provide arguments in defense of this refinement, and characterize the set of equilibrium payoffs. This paper provides a set of theoretical results to identify the structure of equilibrium payoffs with special attention to the payoff of the agent. By focusing on complete information we are in a position to evaluate the effects of competition per se on the magnitude of the rent obtained by the agent. We illustrate this user guide on a wide and diverse family of applications including auctions, competition for an input, economic influence, and private production of public goods. Journal of Economic Literature Classification Numbers: C72, D72

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