Le Bureau des Légendes: A Dynamic Theory of Double Agents

Sebastian Galiani and Franco Mettola La Giglia

No 35085, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper models double agents—individuals coerced into simultaneously serving two rival intelligence agencies—as a finite-horizon trilateral game between Agency A, Organization B, and the Mole M. The double agent persists within a corridor of survival: a set of bilateral beliefs under which both principals continue the relationship. Under a linear-quadratic-Gaussian benchmark, we obtain a closed-form characterization of the corridor geometry, analytical upper bounds on expected duration, and three main results: (i) existence of a double-agent equilibrium, (ii) structural transitoriness— belief updating, terminal unraveling, and compounding survival risk ensure inevitable collapse, and (iii) comparative statics linking monitoring technology, punishment severity, and protection costs to expected duration. The key mechanism is self-destructive experimentation: B learns about the mole’s type through both the type-dependence of effort and the traceability channel γ, which amplifies this learning. Extensions establish existence under general specifications and show that duration decays exponentially in the number of rival agencies. Predictions are consistent with historical patterns from Kim Philby to the Cold War mole hunts. The setting—bilateral coercion, existential participation constraints, and Bayesian learning in a finite-horizon trilateral structure— defines what we term antagonistic common agency.

JEL-codes: C70 (search for similar items in EconPapers)
Date: 2026-04
New Economics Papers: this item is included in nep-des and nep-gth
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