Existence of Equilibrium in Common Agency Games with Adverse Selection

We establish the existence of sequential equilibria in general menu games, known to be sufficient to analyze common agency problems. In particular, we show that our result solves some unpleasant features of early approaches.Common Agency, Menu Games, Sequential Equilibrium

Existence of Equilibrium in Common Agency Games with Adverse Selection

We establish the existence of sequential equilibria in general menu games, known to be su±cient to analyze common agency problems. In particular, we show that our result solves some unpleasant features of early approaches.

Existence of Equilibrium in Common Agency Games with Adverse Selection

We establish the existence of sequential equilibria in general menu games, known to be sufficient to analyze common agency problems. In particular, we show that our result solves some unpleasant features of early approaches.N/

Non-exclusivity and adverse selection: An application to the annuity market

Using a common agency framework, we characterize possible equilibria when annuities contracts are not exclusive. We discuss theoretical and empirical implications of these equilibria. First, we show that at equilibrium prices are not linear. Then we characterize an equilibrium. We provide conditions for existence and show that this equilibrium is efficient.Menus, Common Agency, Insurance, Annuity Markets, Adverse Selection, Efficiency

Common Agency Equilibria with Discrete Mechanisms and Discrete Types

This paper characterizes the equilibrium sets of an intrinsic common agencygame with discrete types and direct revelation mechanisms. After presentinga general algorithm to find the pure-strategy equilibria of this game, we use itto characterize these equilibria when the two principals control activitieswhich are complements in the agent’s objective function. Some of thoseequilibria may entail allocative inefficiency. For the case of substitutes, wedemonstrate non-existence of such equilibria with direct mechanisms, butexistence may be obtained with indirect mechanisms. Finally, we relax theequilibrium concept and analyze quasi-equilibria. We show that existence isthen guaranteed and characterize the corresponding allocations.

Endogenous Mechanisms and Nash Equilibrium in Competitive Contracting

We model strategic competition in a market with asymmetric information as a noncooperative game in which each firm competes for the business of a buyer of unknown type by offering the buyer a catalog of products and prices. The timing in our model is Stackelberg: in the first stage, given the distribution of buyer types known to all firms and the deducible, type-dependent best responses of the agent, firms simultaneously and noncooperatively choose their catalog offers. In the second stage the buyer, knowing his type, chooses a single firm and product-price pair from that firm's catalog. By backward induction, this Stackelberg game with asymmetric information reduces to a game over catalogs with payoff indeterminacies. In particular, due to ties within catalogs and/or across catalogs, corresponding to any catalog profile offered by firms there may be multiple possible expected firm payoffs, all consistent with the rational optimizing behavior of the agent for each of his types. The resolution of these indeterminacies depends on the tie-breaking mechanism which emerges in the market. Because each tie-breaking mechanism induces a particular game over catalogs, a reasonable candidate would be a tie-breaking mechanism which supports a Nash equilibrium in the corresponding catalog game. We call such a mechanism an endogenous Nash mechanism. The fundamental question we address in this paper is, does there exist an endogenous Nash mechanism - and therefore, does there exist a Nash equilibrium for the catalog game? We show under fairly mild conditions on primitives that catalog games naturally possess tie-breaking mechanisms which support Nash equilibria.common agency with adverse selection, endogenous contracting mechanisms, discontinuous games, catalog games, existence of Nash equilibrium, competitive contracting

Tax evasion, corruption, and the remuneration of heterogeneous inspectors

The author develops a general model for addressing the question of how to compensate tax inspectors in an economy where corruption is pervasive - a model that considers the existence of strategic transmission of information. Most of the literature on corruption assumes that the taxpayer and the tax inspector jointly decide on the income to report, which also determines the size of the bribe. In contrast, this model considers the more realistic case in which the taxpayer unilaterally chooses the income to report. The tax inspector cannot change the report and is faced with a binary choice: either he negotiates the bribe on the basis of the income report or he denounces the tax evader and therefore renounces the bribe. In his model, the optimal compensation scheme must take into account the strategic interaction between taxpayers and tax inspectors: a) Pure"tax farming"(paying tax inspectors a share of their tax collections) is optimal only when all tax inspectors are corruptible. b) When there are both honest and corruptible inspectors, the optimal compensation scheme lies between pure tax farming and a pure wage scheme. c) Paradoxically, when inspectors are hired beforehand, it may be optimal to offer contracts that attract corruptible inspectors but not honest ones.Banks&Banking Reform,Environmental Economics&Policies,Poverty Impact Evaluation,Economic Theory&Research,Business Environment,Environmental Economics&Policies,Business Environment,Economic Theory&Research,Poverty Impact Evaluation,Banks&Banking Reform

The Revelation and Delegation Principles in Common Agency Games

In the context of common agency adverse-selection games weillustrate that the revelation principle cannot be applied to studyequilibria of the multi-principal games. We then demonstrate thatan extension of the taxation principle – what we term the“delegation principle” – can be used to characterize the set of allcommon agency equilibria.revelation principle, delegation principle, taxationprinciple, common agency, adverse selection.