Strategic Consensus

Toke Aidt and Jayasri Dutta ()

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: We study equilibrium retention rules in a dynamic common agency game. The decision to reappoint or not is made by a committee consisting of two principals: the retention decision is uncertain if the two principals disagree. We demonstrate that all equilibrium paths exhibit what we call strategic consensus: the agent takes actions that satisfy the performance standards of all principals on the one hand, and all principals lower their standards such that the agent wants to satisfy them on the other. This result applies both to economies with sub- and super-additive costs of providing utilities to the principals.

Keywords: Common agency; retention rules and uncertainty. (search for similar items in EconPapers)
JEL-codes: C7 D80 M52 (search for similar items in EconPapers)
Pages: 22
Date: 2004-01
Note: PE
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Citations: View citations in EconPapers (5)

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Journal Article: Strategic consensus (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:0403

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