Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
984519 | Research in Economics | 2006 | 8 Pages |
Abstract
We study a simple contracting game with a principal and two agents. Contracts exert externalities on non-contractors. The principal can either contract both agents in a centralized manner, or delegate one agent to contract the other. We show that the choice of the principal depends on the sign of the externality. If this is positive, the principal prefers to delegate as long as the agency costs are not too high; if the externality is negative, the principal prefers to centralize for all sizes of agency costs.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Sergio Currarini, Francesco Feri,