Martimort, David and Stole, Lars (2011): Public Contracting in Delegated Agency Games.

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Abstract
We study games of public delegated common agency under asymmetric information. Us ing tools from nonsmooth analysis and optimal control, we derive best responses and characterize equilibria (both continuous and discontinuous) using selfgenerating opti mization programs of which any equilibrium allocation must be a solution. Special atten tion is given to common agency games in which each principal’s payoff is a linear function of the agent’s action. In such games the selfgenerating optimization program reduces to the maximization of the principals’ “aggregate” virtual surplus in which the agent’s marginal valuation is replaced by a confluence of “virtual” valuations that reflect com mon agency problems. One noteworthy subset of equilibrium allocations are “virtually truthful” which are the incompleteinformation generalization of Bernheim and Whin ston’s (1986) “truthful” equilibria. Virtuallytruthful equilibria are simple to calculate and illustrate two distinct sources of equilibrium distortion: inefficient contracting by a given coalition of active principals and inefficient participation (insufficient activity) by principals. Our results are illustrated by means of two games: a public goods game in which each player simultaneously offers a menu contract to a common provider of the public good in order to induce greater supply, and a lobbying game between conflicting interest groups in which each group offers a menu of contributions to a common political decisionmaker in an attempt to influence policymaking.
Item Type:  MPRA Paper 

Original Title:  Public Contracting in Delegated Agency Games 
Language:  English 
Keywords:  Common agency, asymmetric information, menu auctions, delegated contracting games, public goods, lobbying, nonsmooth analysis, nonsmooth control 
Subjects:  D  Microeconomics > D7  Analysis of Collective DecisionMaking > D73  Bureaucracy; Administrative Processes in Public Organizations; Corruption D  Microeconomics > D8  Information, Knowledge, and Uncertainty C  Mathematical and Quantitative Methods > C6  Mathematical Methods; Programming Models; Mathematical and Simulation Modeling > C61  Optimization Techniques; Programming Models; Dynamic Analysis C  Mathematical and Quantitative Methods > C7  Game Theory and Bargaining Theory > C72  Noncooperative Games 
Item ID:  32874 
Depositing User:  Lars A. Stole 
Date Deposited:  18. Aug 2011 11:02 
Last Modified:  12. Feb 2013 22:53 
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URI:  http://mpra.ub.unimuenchen.de/id/eprint/32874 