Delegation Principle for Multi-agency Games under Ex Post Equilibrium

Yu Chen () and Zhenhua Wu ()
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Yu Chen: Nanjing University
Zhenhua Wu: Nanjing University

No 2012-008, CAEPR Working Papers from Center for Applied Economics and Policy Research, Department of Economics, Indiana University Bloomington

Abstract: We explore the strategic equivalence of the delegated menu contracting procedure in pure-strategy multi-agency games under ex post equilibrium. Our model setup permits "full-blown interdependence," including information externality, contract externality, correlated types, and primitive constraints across the contracts for different agents. Our delegation principle identifies that (optimal) ex post menu design is strategically equivalent to (optimal) bilateral ex post mechanism design, which simplifies collective ex post mechanism design by ignoring relative information evaluation. Moreover, one can restrict attention to product menu design problems out of general menu design problems if the contract constraint sets have product structures. Our results still hold if we include individual rationality or any degenerated form of "full-blown interdependence."

Keywords: multi-agency; ex post equilibrium; mechanism design; menu design; delegation principle (search for similar items in EconPapers)
JEL-codes: C79 D82 D86 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2012-11
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