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Relational Political Contribution under Common Agency
Author(s) -
ISHIHARA AKIFUMI
Publication year - 2017
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/jpet.12215
Subject(s) - outcome (game theory) , preference , agency (philosophy) , common value auction , punishment (psychology) , microeconomics , economics , principal (computer security) , politics , principal–agent problem , social psychology , computer science , psychology , finance , political science , corporate governance , philosophy , epistemology , law , operating system
Abstract Motivated by commitment problems of contracts in lobbying, this paper studies a model of a repeated common agency where monetary transfers must be voluntary. First, we show that the optimal punishment strategy for a principal takes a two‐phase scheme, which is similar to the punishment characterized by Goldlücke and Kranz. Second, we investigate whether an outcome of standard menu auctions with binding contracts can be supported by implicit contracts. We define the environment to be more preference‐diverse if an efficient decision is less attractive to each principal. We show that the discount factor must be high to support the outcome of the standard menu auction if the environment is preference‐diversified.