Arbeitspapier

Common agency with informed principals: Menus and signals

I analyze common agency games in which the principals, and possibly the agent, have private information. I distinguish between games in which the principals delegate the final decisions to the agent, and games in which they retain some decision power after offering their mechanisms. I show that, in contrast with mechanism design models with one informed principal, Myerson's Inscrutability Principle fails when there are many informed principals. I also find that, in contrast with common agency models with uninformed principals, the Delegation Principle (Menu Theorem) fails when principals are informed. I then focus on Perfect Bayesian Equilibria in which principals offer their mechanisms without randomizing. I characterize the outcomes of arbitrary games with delegation as outcomes of a new game in which principals offer menus and send cheap-talk signals. Next, I characterize the outcomes of arbitrary games without delegation as outcomes of a new game in which principals offer menus of direct revelation mechanisms, to which they truthfully report their types.

Language
Englisch

Bibliographic citation
Series: Discussion Paper ; No. 1541

Classification
Wirtschaft
Noncooperative Games
Asymmetric and Private Information; Mechanism Design
Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
Economics of Contract: Theory
Subject
common agency
informed principals
Inscrutability Principle
Delegation Principle
menus
signals
direct revelation mechanisms

Event
Geistige Schöpfung
(who)
Galperti, Simone
Event
Veröffentlichung
(who)
Northwestern University, Kellogg School of Management, Center for Mathematical Studies in Economics and Management Science
(where)
Evanston, IL
(when)
2011

Handle
Last update
10.03.2025, 11:44 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Galperti, Simone
  • Northwestern University, Kellogg School of Management, Center for Mathematical Studies in Economics and Management Science

Time of origin

  • 2011

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