On multiple-principal multiple-agent models of moral hazard

Andrea Attar, Eloisa Campioni, Gwenaël Piaser () and Uday Rajan
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Gwenaël Piaser: CREFI-LSF, University of Luxembourg

Working Papers of CREFI-LSF (Centre of Research in Finance - Luxembourg School of Finance) from CREFI-LSF, University of Luxembourg

Abstract: In multiple-principal multiple-agent models of moral hazard, we provide sufficient conditions for the outcomes of pure-strategy equilibria in direct mechanisms to be preserved when principals can offer indirect communication schemes. The conditions include strong robustness in the direct mechanism game, as developed in the literature on competing mechanisms by Peters (2001) and Han (2007a), and a no-correlation property we define. We provide a rationale for restricting attention to take-it or leave-it offers, as is typically done in applications. We show via examples that it is necessary to allow direct mechanisms to be stochastic and to include private recommendations from principals to agents to preserve the corresponding equilibrium outcomes, and that the no-correlation condition is tight.

Keywords: Moral hazard; multiple principal; multiple agent; direct mechanisms. (search for similar items in EconPapers)
JEL-codes: D82 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec and nep-cta
Date: 2007
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