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Common Agency and Partial Cooperation
Author(s) -
Siqueira Kevin
Publication year - 2001
Publication title -
journal of public economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.809
H-Index - 32
eISSN - 1467-9779
pISSN - 1097-3923
DOI - 10.1111/1097-3923.00070
Subject(s) - incentive , agency (philosophy) , perspective (graphical) , outcome (game theory) , microeconomics , economics , pareto principle , partial equilibrium , first mover advantage , industrial organization , computer science , operations management , general equilibrium theory , epistemology , artificial intelligence , philosophy
A modified common agency model is used to investigate the impact of partial cooperation on agent incentives. In the case where principals move simultaneously, it is shown that partial cooperation is self‐defeating from the organizing principals' perspective despite a strengthening of agent incentives and effort. In the second scenario, where the organizing principals have a first‐mover advantage, it is demonstrated that not only are individual cooperating principals better off but the outcome in terms of agent incentives and effort is constrained Pareto efficient. This latter scenario illustrates the possibility that partial cooperation, when coupled with a strategic advantage, improves efficiency.