Cambridge Working Papers in Economics
Faculty of Economics
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Aidt, T., & Dutta, J. (2004). Strategic consensus. https://doi.org/10.17863/CAM.5006
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.
Classification-JEL: C7, D80, M52, Common agency, retention rules and uncertainty.
External DOI: https://doi.org/10.17863/CAM.5006
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