Truthful Revelation Mechanisms for Simultaneous Common Agency Games

Giacomo Calzolari () and Alessandro Pavan

No 1458, Discussion Papers from Northwestern University, Center for Mathematical Studies in Economics and Management Science

Abstract: In games in which multiple principals contract simultaneously and non-cooperatively with the same agent, standard direct revelation mechanisms in which the agent reports his “type”(i.e. his exogenous private information) have been proven inadequate to characterize the entire set of equilibrium outcomes. This paper introduces a more general class of revelation mechanisms in which the agent reports also the contractual decisions he is inducing with the principals. We rst show that such a class has the same nice properties as the class of all unrestricted menus: (i) for any equilibrium of any indirect game with arbitrary communication space for the principals, there exists a truthful equilibrium in the game in which the principals are restricted to o¤er revelation mechanisms that sustains the same outcomes; (ii) any truthful equilibrium is robust in the sense that it remains an equilibrium in any game in which the principals’strategy space is enlarged. We next show how revelation mechanisms can be put to work in applications such as menu auctions, moral hazard settings, and competition in non-linear tari¤s to identify necessary and su¢ cient conditions for the sustainability of outcomes as common agency equilibria.

Keywords: mechanism design; contracts; Revelation Principle. (search for similar items in EconPapers)
JEL-codes: D89 C72 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cta and nep-gth
Date: 2007-07

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Working Paper: Truthful Revelation Mechanisms for Simultaneous Common Agency Games (2008)
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