Sequential Contracts and Information Transmission Between Principals

Giacomo Calzolari () and Alessandro Pavan

No 1606, Econometric Society World Congress 2000 Contributed Papers from Econometric Society

Abstract: We consider games of incomplete information where a common agent sequentially interacts with two principals. In this setting we show that the Revelation Principle applies: there is no loss of generality in assuming that the two principals restrict attention to direct revelation mechanisms. This result contrasts sharply with standard simultaneous common agency games in which the Revelation Principle is usually invalid. We provide a general model of sequential common agency under asymmetric information and we characterize the unique pure-strategy equilibrium in deterministic contracts for complementary decisions. Finally, we endogenize the information flow between the two principals. We show that the Stackelberg leader can benefit from committing to a mechanism that (partially) signals the agent's private information to the second principal.

Date: 2000-08-01
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