We study common agency problems in which principals (groups) make costly commit-ments to incentives that are conditioned on imperfect signals of the agent’s action. Ourframework allows for incentives to be either rewards or punishments and an equilibrium al-ways exists. For our canonical example with two principals we obtain a unique equilibrium,which typically involves randomization by both principals. Greater similarity between prin-cipals leads to more aggressive competition. The principals weakly prefer punishment torewards, sometimes strictly. With rewards an agent voluntarily joins both groups; with pun-ishment it depends on whether severe punishments are feasible and cheap for the principals.We study whether introducing an attractive compromise reduces competition between prin-cipals. Our framework of imperfect monitoring offers a natural perturbation of the standardcommon agency model, which results in sharper equilibrium predictions. The limit equilib-rium prediction provides support to both truthful equilibria and the competing notion ofnatural equilibria, which unlike the former may be inefficient.
|Numero di pagine||25|
|Rivista||Journal of Economic Theory|
|Stato di pubblicazione||Published - 2018|
All Science Journal Classification (ASJC) codes
- Economics and Econometrics