Two-Sided Communication in Competing Mechanism Games

Andrea Attar Eloisa Campioni

July 13, 2012

Gwenal Piaser

Abstract We consider multiple-principal multiple-agent games of incomplete information. We identify a class of two-way communication mechanisms which mirror those considered in the single principal analysis of Myerson (1982). In such mechanisms, every agent truthfully reveals her type to all principals, and obeys the private recommendations she receives from each of them. We show that there is a rationale in restricting attention to this class of mechanisms: if principals use mechanisms that induce agents to behave truthfully and obediently in every continuation equilibrium, there is no unilateral incentive to deviate towards more sophisticated mechanisms. We develop three examples to analyze possible extensions and limits of our approach. The rst two examples show that the restriction to direct incentive compatible mechanisms is not sufcient to provide a complete characterization of all pure strategy equilibria. The third one shows that private recommendations play a fundamental role in these competing mechanism games suggesting that one cannot safely restrict to one-sided communication mechanisms. Key words: Incomplete information, competing mechanisms, information revelation. JEL Classication: D82.

paper supersedes the former "Information Revelation in Competing Mechanism Games". We thank an associate editor and two anonymous referees for very thoughtful and detailed comments which substantially improved our work. University of Rome II, Tor Vergata and Toulouse School of Economics (IDEI-PWRI); anattar@cict.fr. University of Rome II, Tor Vergata; eloisa.campioni@uniroma2.it. IPAG Business School, Paris; gwenael.piaser@ipag.fr.

This

Introduction

This paper contributes to the analysis of competing mechanism games with incomplete information. We consider a scenario in which several principals simultaneously design incentive contracts in the presence of several agents who are privately informed about their characteristics. This class of strategic interactions provides a natural framework to represent the relationship between competition and incentives under incomplete information. The situation in which only one agent is considered (common agency) has become a reference set-up to formalize competition in nancial markets (Attar, Mariotti, and Salanie, 2011, 2012; Biais, Martimort, and Rochet, 2000), conicts between regulators (Calzolari, 2004; Laffont and Pouyet, 2004), and to revisit classical issues in oligopoly theory (dAspremont and Dos Santos Ferreira, 2010; Martimort and Stole, 2009; Stole, 1995). Building on the seminal contribution of McAfee (1993), multiple-principal multiple-agent models are often used to represent trading in online markets (Ellison, Fudenberg, and Mbius, 2004; Peters and Severinov, 1997), and in nancial assets (Han (2011)). Vertical restraints contexts and competition among hierarchies under asymmetric information are also modeled as games with several principals and agents.1 A central issue of any approach to competing mechanisms is the denition of the set of mechanisms that are available to principals. Following the traditional analyses of oligopolistic screening, most economic models of competing mechanisms restrict attention to one-way communication mechanisms. That is, principals commit to message-contingent decisions which induce agents to truthfully reveal their exogenous private information: [...] the literature on competing mechanisms [McAfee (1993), Peters and Severinov (1997)] has restricted principals to direct mechanisms in which agents report only private information about their preferences, (see Epstein and Peters, 1999, p.121). It is now an established result that such a restriction involves a loss of generality even in single agent (common agency) environments.2 One should however notice that economic applications of common agency have identied a strong rationale for making use of these mechanisms. At any pure strategy equilibrium, every single competitor behaves as a monopolist facing a single agent whose reservation utility is endogenous. The optimal behavior of this monopolist can therefore be characterized through type-revelation mechanisms that induce the agent to behave
1 See Gal-Or (1997) for a survey of the early contributions in this area and Martimort and Piccolo (2010) for a recent application. 2 That is, when common agency games are considered, there exist equilibrium outcomes that can be supported through arbitrary (indirect) communication mechanisms but not through direct revelation ones (see Martimort and Stole (2002), and Peters (2001)).

truthfully. Given this property, and provided that the agents indirect utility function satises some regularity conditions, several features of equilibrium allocations can be derived.3 In the same spirit, although on a more theoretical ground, Theorem 2 in Peters (2003) establishes that pure strategy equilibria of common agency games in which principals offer truth-telling mechanisms are robust to unilateral deviations towards any arbitrary indirect mechanism. That is, the corresponding outcomes can be supported in a pure strategy equilibrium of the game in which principals can use general communication mechanisms. In games with several agents, a similar result has only been derived in the case of complete information over the agents private characteristics. In this context, the recent works of Han (2007) and Attar, Campioni, Piaser, and Rajan (2010) identify a set of pure strategy equilibrium outcomes that survive unilateral deviations of principals to arbitrary communication mechanisms. The present work identies a class of mechanisms featuring two-way communication which play a similar role in multiple-principal multiple-agent models of incomplete information.4 These mechanisms are reminiscent of those originally introduced by Myerson (1982) for the crucial role played by private recommendations sent by principals to agents. Communication is therefore two-sided even if principals are restricted to use direct mechanisms. We dene a notion of incentive compatibility accordingly, and we show that every pure-strategy equilibrium outcome of the direct mechanism game in which principals use incentive compatible mechanisms survives unilateral deviations towards more sophisticated communication schemes. Our analysis therefore extends Theorem 2 of Peters (2003) to games with several agents. At the same time, it complements the results of Han (2007) and Attar, Campioni, Piaser, and Rajan (2010) who analyze complete information environments in which agents take contractible and non-contractible actions, respectively. The distinguishing feature of a situation in which principals compete in the presence of several agents who are privately informed about their characteristics can be illustrated as follows. From the viewpoint of a single principal, the messages that agents send to his rivals can be seen as hidden actions. Given the prole of mechanisms proposed by his opponents, any principal is facing the same situation as if he was interacting with several agents who have private information and take some non-contractible actions, i.e. the messages they send to the other principals. It is hence natural to ask whether a principal could gain by using mechanisms that induce agents
methodology is intensively used in applications of common agency models with incomplete information to nance (Biais, Martimort, and Rochet, 2000; Khalil, Martimort, and Parigi, 2007), public economics and regulation theory (Bond and Gresik, 1996; Calzolari, 2004; Laffont and Pouyet, 2004; Olsen and Osmundsen, 2001), and to Political Economy (Martimort and Semenov, 2008). A general exposition of the methodology is provided in Martimort and Stole (2003) and Martimort and Stole (2009). 4 Throughout the paper, we use the term incomplete information to identify situations in which principals are not perfectly informed about the agents (exogenous) private characteristics.
3 This

to correlate on the messages they send to his opponents. One should however appreciate that, in our multiple-principal multiple-agent framework, agents simultaneously send messages to principals. This constitutes a major difference with Myerson (1982)s setting, in which the agents non-contractible actions (efforts) are taken after having sent messages to principals and having received recommendations from them. To evaluate the role of private recommendations, we therefore allow principals to privately communicate with agents before receiving the messages from them. In such a context, we say that a mechanism is direct if the messages that can be sent by any single agent and the recommendations she is allowed to receive can only consist of her exogenous private information. In addition, we say that a direct mechanism is incentive compatible from the viewpoint of any principal j given the behavior of his competitors, if it induces each agent to truthfully reveal her type to principal j and to obey his recommendations. Direct and incentive compatible mechanisms have an obvious appeal, they are easy to characterize. We show that, in competing mechanism games of incomplete information, there is a rationale to restrict principals to use such mechanisms, in the sense that every pure strategy equilibrium of a direct mechanism game in which principals use incentive compatible mechanisms and agents behave truthfully and obediently is robust to unilateral deviations towards more complex communication schemes. Although incentive compatible mechanisms play a major role in our construction, one cannot safely restrict attention to them when determining the optimal behavior of a single principal for any given prole of mechanisms offered by his rivals. We stress this point with a rst example analyzing the situation in which a principal faces a competitor who offers an indirect mechanism involving some private recommendations. From the viewpoint of this principal, the recommendations sent by his rival constitute an additional source of private information for agents. He therefore has an incentive to use a sophisticated communication mechanism to extract this additional information. More generally, we investigate whether, given their central role in our analysis, incentive compatible mechanisms can constitute a general device to characterize equilibria in competing mechanism games of incomplete information. We provide a negative answer to this question by developing a second example which shows that there exist equilibrium outcomes of a game in which principals use arbitrary communication mechanisms that cannot be reproduced by restricting them to use direct and incentive compatible mechanisms.
5

The mechanisms we consider allow a principal to correlate agents behaviors by introducing uncertainty over his actions. We argue that the possibility to send private recommendations is a key element to generate such uncertainty. We support this view by developing a third example of a two-principal two-agent game of incomplete information in which the equilibrium outcomes
5 Relative to other examples of competing mechanism games developed in the same spirit (Martimort and Stole (2002), Peters (2001), and Peck (1997)), we do explicitly consider private recommendations.

supported by simple type-revelation mechanisms, which do not allow for any recommendation from principals to agents, fail to survive if a single principal deviates towards an indirect mechanism. This indeed suggests that the restriction to type-revelation and truthful mechanisms, usually postulated in the applied literature, may be seriously problematic. The remaining of the paper is organized as follows. Section 2 introduces the general model. Section 3 discusses the robustness of equilibria supported by direct and incentive compatible mechanisms; it contains the main proposition and the rst two examples. Section 4 shows that the equilibrium outcomes sustained by simple type-revelation mechanisms may not survive unilateral deviations towards more sophisticated mechanisms. Section 5 concludes.

The Model

We consider a standard competing mechanism game of incomplete information as done, for example, in Yamashita (2010) and Han (2011), in which several principals (indexed by j J = {1, ..., J}) contract with several agents (indexed by i I = {1, ..., I}). Each agent has private information about her preferences. The information available to agent i is represented by a type i i . We denote = iI i a state of the world, and we take the sets i to be nite. Principals have common beliefs on the probability distribution of , which we denote F. Each principal j can take an action y j Y j . The sets Y j are all compact and Borel measurable. Principal js preferences are represented by the function v j : Y

R+ represents agent is preferences, with Y = jJ Y j . For any given array y = (y1, y2, ..., yJ )
(Y ), the state contingent utilities of agent i and principal j are:

R+, and ui : Y

ui (y, ) =
Y1 Y2

...
YJ

ui (y, ) d y1 d y2 ...d yJ

and v j (y, ) =
Y1 Y2

...
YJ

v j (y, ) d y1 d y2 ...d yJ

Final allocations are determined by the multilateral contracts that principals exchange with agents. Every principal has full control of the communication structure with the only constraint that he cannot make his decisions contingent on the contracts proposed by his rivals. Specically, we consider a situation in which principals can both send and receive (private) messages from agents. Along the lines of Myerson (1982), we refer to the messages sent by principals as to recommendations. Principals actions depend on the messages they receive from agents and on the recommendations they send. The messages sent by each agent, in turn, depend on her initial information and on the private recommendations she receives from any of the principals. 4

More formally, we take Rij to be the set of recommendations that can be sent by principal j to agent i, and we denote M ij the set of messages that can be used by agent i to communicate with principal j. Both Rij and M ij are taken to be nite sets for every i and j. We typically write R j = iI Rij , M j = iI M ij , M = jJ M j and R = jJ R j .6 Similarly, consider an r j R j , we will write r j = (rij , ri ) to represent the vector of recommendations sent by principal j to j agent i and to all other i agents, with ri Ri = h=i Rh . Equivalently, consider an m j M j , j j j we will write m j = (mij , mi ) to represent the vector of messages that principal j receives from j agent i and from all other i agents, with mi M i = h=i M h . j j j A mechanism for principal j is the pair j = ( j , j ), where j (R j ) is a probability distribution over the set of recommendations R j and j : R j M j (Y j ) is a mapping that associates a (stochastic) action to messages and recommendations. We denote j the set of all such mechanisms, and we write = jJ j . We consider the following extensive form game. First, principals simultaneously offer mechanisms, and therefore send private recommendations to agents. Having observed the offered mechanisms, her private recommendations and her own type, each agent sends back a message to each of the principals. In a next step, each principal takes the (eventually stochastic) action prescribed by his mechanism, given the recommendations he sent and the messages he received. Observe that, from the point of view of each principal j, the messages sent by each agent i to his j opponents can be interpreted as hidden actions. In such a competing mechanism setting, however, communication and moral hazard cannot be separated. When agent i communicates her private information to principal j, she simultaneously chooses her hidden actions. This prevents a single principal from making recommendations contingent on the messages he receives from agents. Here, principals can only send recommendations before receiving any message, relying on the ex-ante distribution function F. Notice that a private recommendation from principal j to agent i may hence take the form of a list of messages to be sent to js opponents, one for every type i of agent i. We denote G the multiple-principal multiple-agent game relative to a given set of mechanisms . In this game, a (pure) strategy for principal j is a mechanism j j . A strategy for agent i is the measurable mapping i : Ri i M i , with M i = jJ M ij , and Ri = jJ Rij . For notational convenience, we denote i mi ; , ri , i the probability of agent i sending the array of messages mi when her type is i , given that she received the array of recommendations ri , and that principals played the array of mechanisms = (1 , 2 , ..., J ).
that we treat the message spaces available to every single principal as given; an alternative route to dene a mechanism would be to let each principal j choosing the array of message spaces M ij , as it is done in Peters (2001). This alternative formulation can be introduced in the model without affecting our results.
iI 6 Observe

Every prole of agents strategies = 1 , 2 , ..., I induces a probability distribution over principals actions. Given the mechanisms , the state of the world and the realized recommendations r = r1 , r2 , . . . , rI R, we dene y (Y j ) to be the probability distribution over j principal js actions induced by the strategy prole , i.e.
i y = j (y j |m j , r j ) iI i (mij , mi j ; , rij , r j , i ) j

and we let y be the joint distribution over all principals. The expected payoffs to each agent i j of type i who received the array of recommendations ri can be written as: U i (, , i , ri ) =
Y

Ri

ui (y, ) F(i |i ) di dP ri ri d y ,

(1)

with P ri ri = jJ j (ri |r ji ) representing the conditional probability that principals j send the vector of recommendations ri , given that agent i received ri , and Ri = jJ Ri . j The payoff to principal j is: V j (, , ) =
Y R

v j (y, ) F () d dP (r) d y .

(2)

with P (r) = jJ j (r j ) being the joint probability on recommendations taken over all principals. We typically say that the strategy prole = 1 , 2 , ..., I constitutes a continuation equilibrium relative to if for every i i , for every i I and for every : U i , , i , ri U i i , i , , i , ri , (3)

for all i . We take Perfect Bayesian Equilibrium (PBE) to be the relevant solution concept. In the following, we will consider situations in which principals are restricted to offer direct and incentive compatible mechanisms. A mechanism available to principal j is direct if M ij = i |i | J1 and Rij = i for all i and j. In a direct mechanism, the messages and the recommendations used by each agent and by each principal can only consist of types. As a consequence, the strategy of each agent i reduces to a function of types and offered mechanisms only, which we denote i (, i ). We let D be the set of such direct mechanisms for principal j and GD be j the multiple-principal multiple-agent game in which principals are restricted to use direct mechanisms. A direct mechanism is incentive compatible from the point of view of principal j if, given the mechanisms offered by the other principals, it induces a continuation equilibrium in which:

 each agent i of type k sends to principal j, with j = j, the message she was recommended by principal j, each agent i of type k reports her true type to principal j. This notion of incentive compatibility therefore parallels that originally formulated by Myerson (1982), in terms of agents being truthful and obedient, provided that one takes as given the behavior of J 1 principals. However, a mechanism which is incentive compatible from the viewpoint of principal j may induce agents to lie to some j principal.
7

Finally, we dene the restricted class of mechanisms in which agents only communicate their own type, but principals do not privately communicate with agents. That is, M ij = i and Rij is a singleton for every i and j. For each principal j, we hence denote type-revelation mechanism any mapping j : (Y j ), and we let j be the set of type-revelation mechanisms available to principal j. For a given prole of mechanisms j j = k= j k , we then say that j j j is a type-revelation and truthful (i.e. incentive compatible) mechanism if the array ( j , j ) induces a continuation equilibrium in which agents truthfully reveal their type to principal j. As we already remarked in the Introduction, most economic applications of competing mechanism games with incomplete information restrict principals to offer typerevelation and truthful mechanisms, which motivates our interest in them.

Robust Equilibria

In this section, we argue that direct incentive compatible mechanisms satisfy a basic requirement of any economic model of competition, that is, the corresponding equilibrium outcomes survive when a single principal is allowed to deviate towards arbitrary communication mechanisms. This robustness issue has already been formalized in the competing mechanism literature. Specically, when several principals deal with only one agent, Peters (2003) shows that any pure strategy equilibrium relative to simple type-revelation mechanisms is weakly robust. That is, following any unilateral deviation towards a complex mechanism, there always exists a continuation equilibrium that punishes the deviating principal. In games with several agents, attention has typically been restricted to the more tightening notion of strong robustness: in a strongly robust equilibrium, each principals equilibrium payoff is no less than his payoff in all continuation equilibria induced by any other available mechanism. In contexts in which agents
that, when considering direct incentive compatible mechanisms for all principals, we are implicitly focusing on those equilibria of the GD game in which agents behave truthfully and obediently with every principal. In this respect, we do not use the notion of direct incentive compatible mechanisms to introduce a restriction on principals strategy spaces, but rather on the set of equilibria we consider in our analysis.
7 Observe

types are publicly known, Han (2007) and Attar, Campioni, Piaser, and Rajan (2010) identify direct mechanisms that satisfy the following property: any pure strategy strongly robust equilibrium relative to such direct mechanisms remains a pure strategy strongly robust equilibrium in any competing mechanism game in which complex communication mechanisms are available.8 We show in the present section that direct incentive compatible mechanisms, as previously dened, serve the same role in multiple-principal multiple-agent games of incomplete information. In particular, we restrict attention to those equilibria in which agents behave truthfully and obediently on the equilibrium path, and each principal exploits the power of incentive compatibility out of equilibrium. Following any single principals deviation, each player hence believes that the agents will coordinate on the continuation equilibrium in which every agent truthfully reports her private information to the deviating principal and obeys his recommendations. This indeed allows agents to lie to the non-deviating principals, at any deviation stage. The result is formally established in the next proposition.

Proposition 1 Let , be a pure strategy prole in the game GD such that: (i) ( , ) corresponds to a continuation equilibrium in which each agent truthfully reveals her type to each of the principals and obeys the recommendations she receives; (ii) for every j, and for every j = j , with j D , the prole j , j , corresponds to a j continuation equilibrium in which each agent truthfully reveals her type to principal j and obeys his recommendations. Then, if , is an equilibrium in the game GD , the corresponding outcome can be supported as a pure strategy PBE in any competing mechanism game G . Proof. The proof is developed by contradiction. Were the statement not true, there would exist a principal who has a unilaterally protable deviation to some arbitrary mechanism, yielding a payoff strictly higher than the equilibrium one. We show that were this the case, the same payoff could be achieved by means of a direct and incentive compatible mechanism for the deviating principal. Thus, the assumption that , is an equilibrium in the game GD would be contradicted. To start with, we extend the continuation equilibrium = 1 , 2 , . . . , I in the game GD to all prole of mechanisms in G , as it is done in the proofs of Theorem 1 and 2 in Peters (2003).
8 In particular, Han (2007) considers a situation in which agents actions are fully contractible, and Attar, Campioni, Piaser, and Rajan (2010) extend the analysis to moral hazard contexts.

For every and , given the array of private recommendations ri , ri received by agents, we take = , ri , i , extended set. In particular, we let , i = i , i
i i i

, ri , i

to be the continuation equilibrium on such

i, i , and D

(4)

that is, each type of every agent sends exactly the same array of messages in the "enlarged" game in which all communication mechanisms are feasible. For all \ D , we let (, r, ) be any continuation equilibrium. Let j be the deviating principal and let j = j , j be a mechanism such that: V j j , j , j , j , r j , , > V j , , . (5)

Observe that for (5) to hold, one must necessarily have j D , since , is an equilibj rium in the game GD . We now show that for any j j \ D that satises (5), it is possible to j construct an equivalent incentive compatible mechanism for principal j yielding him exactly the payoff V j j , j , j , j , r j , , . We rst take i mij , mi j ; j , j , rij , i to be the probability that agent i sends the messages (mij , mi j ) i
J

to principals in the continuation equilibrium induced by the mechanisms

j , j , given her type i , the private recommendation rij she receives from principal j.9 For
i a given agent i and for a given principal j, we also take zi j : i k= j Mk to be any mapping

that associates to each type i of agent i an array of messages mi j that she sends to all principals but j, given some private recommendation rij . The distribution i mij , zi j (i ); j , j , rij , i , hence identies the behavior of each agent i of type i in the continuation equilibrium for a given zi j . We then denote j (zi j |rij ) = i i i mij , zi j (i ); j , j , rij , i dmij , (6)

M ij

the probability that agent i plays according to zi j given that she received the recommenda tion rij . Finally, we consider
9 Because

we have assumed nite communication sets, there exists at least one such a continuation equilibrium.

 j (z j ) = iI

Rij

Ri j

j zi j |rij j rij , ri dri drij , j j

(7)

in which j rij , ri is the (joint) probability that the private recommendations (rij , ri ) are sent j j by principal j to agents in the deviating mechanism j . j (z j ) identies the probability with which principal j recommends the array z j = z1 j , z2 j , ..., zI j to agents who are obedient. In other words, if principal j sends recommendations according to the distribution j (z j ) and agents behave obediently, he can reproduce the same probability distribution over the messages sent by agents to the non-deviating principals in the continuation equilibrium following the deviation to j . Consider now the mapping j : R j (Y j ) such that: j (r j , ) = j (m j , r j ) m j , m j ; j , j , r j , dm j dm j , (8)

M j M j

in which m j , m j ; j , j , r j , is the joint probability distribution over the messages sent by agents to principal j in the continuation equilibrium induced by the deviation, and M j = k= j Mk . For any given array of recommendations r j R j , and given the mechanisms j , the type-contingent mapping j induces the same probability distribution over principal js actions as that generated by in the continuation equilibrium when agents truthfully report their
j

private information to principal j. To guarantee that the direct mechanism is incentive compatible from the point of view of principal j we must construct it in such a way to incorporate the recommendation strategy j followed by principal j at the deviation stage. Following the deviation to j , it may happen that different recommendations of principal j induce agents to send the same messages to principals other than j in the continuation equilibrium. We address this issue as follows. First, take any array of messages m j and let r j (m j ) = r j : m j ; j , j , m j , r j , > 0 for some m j be the set of private recommendations in the support of the deviating mechanism that induces agents to play m j with a strictly positive probability in given that m j has been sent to principal j. Second, consider the mapping j (m j , ) =
r j (m j ) j (r j , )

j (r j ) dr j dr j

r j (m j ) j (r j )

(9)

10

|i | J1 with j (r j ) = j rij , ri . For each array of messages m j i sent with a j the mapping (.) induces the j strictly positive probability in the continuation equilibrium , same distribution over principal js actions as j (.) as long as agents obey the corresponding recommendations of principal j. Observe that, by sending the recommended array of messages m j , agents induce principal j to select a random action taking into account the uncertainty associated to j (r j ). It hence follows that, given j , the mechanism j = j , j dened in (7) and (9) is incentive compatible from the point of view of principal j. That is, there exists a continuation equilibrium induced by the array ( j , j ) in which agents behave in a truthful and obedient way to principal j. The mechanism j therefore constitutes a protable deviation for principal j in the game GD , which leads to the contradiction.

The intuition for Proposition 1 can be provided along the lines of the canonical Myerson (1982) construction. When contemplating a unilateral deviation, a single principal is facing a moral hazard problem: he cannot contract on the messages that agents send to his opponents. In such a context, any payoff attainable by this deviating principal could also be obtained by recommending agents to truthfully reveal their type to each of the non deviating principals. In the corresponding continuation equilibrium, it is always optimal for every agent to follow this recommendation as long as all other agents do so. Importantly, the result holds true although our extensive form slightly differs from the Myersons one. In particular, the deviating principal sends his recommendations before, and not after, having received the agents messages. One should also observe that, starting from Myerson, we analyze a situation in which principals compete through mechanisms. We argue that the notion of incentive compatibility is relevant when a single principal contemplates a unilateral deviation. The proof of Proposition 1 shows that, when analyzing such deviations of some principal j, it is sufcient to consider those towards incentive compatible mechanisms, which may induce agents to lie to any of the non deviating principals. A private recommendation sent by principal j to each of the agents constitutes a source of uncertainty for his rivals. We show that it is possible for the deviating principal to reproduce such an uncertainty by means of a direct incentive compatible mechanism, with agents truthfully revealing their initial private information and obeying his recommendations. A prole of incentive compatible mechanisms that survives these deviations induces an equilibrium outcome any mechanism game G . Remark Proposition 1 relies on a specic system of principals beliefs: every principal believes that agents behave in a truthful and obedient way to him, for any given mechanism proposed by his rivals. Consider the situation in which each j principal offers a direct mechanism. 11

In this case, the payoff earned by principal j in any continuation equilibrium induced by any deviation to some arbitrary mechanism can be reproduced by means of a direct mechanism which is incentive compatible from the viewpoint of principal j. In other words, the strategy prole ( , ) constitutes a strongly robust equilibrium relative to any game G . Proposition 1 therefore provides an analogous result to those established by Han (2007) and Attar, Campioni, Piaser, and Rajan (2010) in environments with complete information. In more general terms, the contribution of Proposition 1 is to provide a simple device to characterize pure strategy equilibria in competing mechanism games. The best reply of principal j to a prole of direct mechanisms offered by his rivals can always be formulated as a direct and incentive compatible mechanism. One could ask whether incentive compatible mechanisms can be used to characterize the best reply of principal j to any array of mechanisms j j . The following example provides a negative answer to this question: the optimal behavior of principal j cannot always be reproduced by incentive compatible mechanisms if his rivals use more sophisticated communication schemes.

Example 1
Let J = 2 and I = 1. Denote the principals as P1 and P2; the allocation spaces are Y1 = {y11 , y12 } for P1, and Y2 = {y21 , y22 } for P2. There is complete information about the agents type, i.e. = {}. Communication is modeled as follows. P1 receives a message m1 M1 = {m11 , m12 } from the single agent, and he cannot send any recommendation, that is R1 = {r1 }. P2 does not receive any message from the agent, i.e. M2 = {m2 }, but he is allowed to send to the agent a private recommendation r2 R2 = {r21 , r22 }. The payoffs are represented in the table below in which the rst payoff is that of P1, who chooses the row, the second payoff is that of P2, who chooses the column, and the last payoff is that of the agent: y21 y22

y11 (1, 2, 1) (0, 2, 0) y12 (0, 2, 0) (1, 2, 1) 1 1 , , 2 2 and 2 (r2i ) = y2i , for i = {1, 2}. In the mechanism 2 , P2 chooses y21 (y22 ) with probability one Suppose now that P2 proposes the (indirect) mechanism 2 = (2 , 2 ) with 2 = whenever he recommends r21 (r22 ). We argue that it is a best reply for P1 to offer the (indirect) mechanism

12

1 (m1 ) =

y11 if he receives the message m11 y12 if he receives the message m12

Indeed, given the mechanisms (1 , 2 ), one can check that it is optimal for the agent to send m11 to P1 when she receives r21 from P2, and to send him m12 when she receives r22 from P2. By proposing the mechanism 1 , P1 can therefore get his maximal payoff of 1. Consider now the situation in which, when determining his best reply to 2 , P1 is restricted to use incentive compatible mechanisms. In our complete information setting, an incentive compatible mechanism is a (eventually stochastic) take-it or leave-it offer. Given the randomization chosen by P2, it is immediate to verify that there is no incentive compatible mechanism that yields P1 a payoff of 1. The example emphasizes that incentive compatible mechanisms may not be exible enough to characterize the optimal behavior of P1 when P2 sends nontrivial recommendations. From the viewpoint of P1, each private recommendation sent by P2 generates an additional private information for the agent. In the example, P1 strictly gains by asking the agent to communicate this new private information. More generally, one can show that restricting attention to equilibrium outcomes of the game GD in which principals use incentive compatible mechanisms inducing agents to behave truthfully and obediently in every continuation equilibrium involves a loss of generality. That is, there exist equilibrium outcomes of a multiple-princpal multiple-agent game that cannot be reproduced by looking at incentive compatible mechanisms. To illustrate this point, we develop a second example.

Example 2
Let J = 3 and I = 2. Denote the principals as P1, P2 and P3, and the agents as A1 and A2. The allocation spaces are Y1 = {y11 , y12 } for P1, Y2 = {y21 , y22 } for P2 and Y3 = {y31 , y32 , y33 } for P3. The agents have no private information, i.e. 1 = 2 = {}. The payoffs of the game are represented in the three tables below where the rst payoff is that of P1, who chooses the row, the second payoff is that of P2, who chooses the column, the third payoff is that of P3 who chooses the table, and the last payoffs are those of A1 and A2.

13

y21 y11 (2, 1, 1, 1, 1)

y22 (10, 1, 0, 0, 0)

y12 (10, 1, 1, 1) (10, 1, 0, 0, 0)

Table 1: Players payoffs if P3 chooses Y31

y21 y12 (2, 1, 0, 0, 0)

y22 (2, 1, 1, 1, 1)

y11 (10, 1, 0, 0, 0) (10, 1, 1, 1, 1)

Table 2: Players payoffs if P3 chooses Y32

y21

y22

y11 (1, 1, 1, 1, 1) (1, 1, 1, 1, 1) y12 (1, 1, 1, 1, 1) (1, 1, 1, 1, 1)

Table 3: Players payoffs if P3 chooses y33

P1 and P3 communicate with the agents by receiving messages. The sets of available mes1 2 1 2 1 2 sages are M1 = M1 = M3 = M3 = {ma ; mb }, M2 = M2 = {m} and R1 = R2 = R1 = R2 = {r}, 1 1 3 3

R1 = R2 = {ra , rb }. 2 2 We consider the situation where P1 proposes the indirect mechanism:

1 =

y11 if he receives the message ma from both A1 and A2 y12 otherwise,

and P3 proposes the indirect mechanism:

y31 if he receives the message ma from both A1 and A2, = y if he receives mb from A1 and A2, 32 y33 if he receives different messages from A1 and A2.

Finally, P2 proposes an indirect mechanisms which involves recommendations, denoted 2 . This mechanism consists of the lottery mixing equally over ra and rb . In addition, the actions of P2 are perfectly correlated with the recommendations he sends. If ra (rb ) realizes, then y21 (y22 ) is chosen with probability one. 14

When they have received the recommendation ra , agents play the following continuation game, where (mk , ml ) denotes the strategy I send the message mk to P1 and the message ml to P3:

(ma , ma ) (ma , ma ) (mb , ma ) (mb , mb ) (1, 1) (1, 1) (1, 1) (ma , mb ) (1, 1)

(ma , mb ) (1, 1) (0, 0) (1, 1) (0, 0)

(mb , ma ) (1, 1) (1, 1) (1, 1) (0, 0)

(mb , mb ) (1, 1) (0, 0) (1, 1) (0, 0)

Table 4: Agents payoffs in the continuation game when the recommendation is ra .

This continuation game has a pure strategy equilibrium in which both agents send the message ma to P3 and ma to P1. If the recommendation sent by P2 is rb , one can check that the corresponding continuation game over messages has a pure strategy equilibrium in which both agents send the message mb to P3 and P1. Given the mechanisms 1 , 2 and 3 , the payoff prole induced by such continuation equilibria is (2, 1, 1, 1, 1). Since each of the principals achieves his maximal payoff, there are no protable unilateral deviations, which shows that these strategies form an equilibrium in our competing mechanism game where principals can communicate with agents through non degenerate messages. At equilibrium, a single principal uses these messages to get additional information over the recommendations sent by his competitors. One should observe that, if we consider the game GD in which principals are restricted to make use of incentive compatible direct mechanisms, P1 cannot anymore achieve a payoff of 2 at equilibrium. When choosing an incentive compatible direct mechanism, P1 does not receive any message from agents, which makes impossible for him to correlate his actions with the recommendations sent by P2. As it stands, the example emphasizes a loss of generality in the restriction to direct and incentive compatible mechanisms. The set of equilibrium outcomes supported through arbitrary indirect mechanisms is larger than the set of outcomes supported through direct incentive compatible ones. The novel feature of the example is the explicit consideration of private recommendations.10 In this respect, the result can be re-interpreted in the following way: if the notion of incentive compatible mechanisms available to each principal j is extended to include the private recommendations that he can send to agents only concerning the messages to be sent
10 This indeed differentiates our Example 2 from standard examples documenting such a loss of generality in single

agent (Martimort and Stole (2002), Peters (2001)) and multiple-agent (Peck (1997)) settings.

15

to all j principals, then restricting principals to mechanisms that induce all agents to behave honestly and truthfully in each continuation equilibrium involves a loss of generality.11

The Need for Recommendations

We have shown in the last section that each equilibrium outcome of the game GD in which agents behave in a truthful and obedient way in every continuation equilibrium survives the introduction of more complicated communication schemes. At this point, one should observe that, although incentive compatibility plays a key role in our analysis, economic models of multiple-principal multiple-agent games with incomplete information have typically restricted attention to a simpler class of mechanisms. Starting with McAfee (1993), most contributions considered a setting in which principals commit to type-revelation mechanisms which induce agents to truthfully reveal their private information. In particular, agents do not receive any private recommendations on their message choices. It seems then natural to investigate whether one can further simplify our analysis by restricting attention to mechanisms in which agents are only asked to reveal their type, with private recommendations playing no role. In the present section, we suggest that our analysis cannot be simplied in a straightforward way. To this extent, we develop a third example stressing the key role of private recommendations in guaranteeing that equilibria supported by direct and incentive compatible mechanisms are robust. Specically, we show that there exist equilibrium outcomes of the game in which principals are restricted to simple type-revelation mechanisms that cannot be supported at equilibrium when principals can arbitrarily select their mechanisms. We therefore emphasize that Proposition 1 does not apply to the game in which principals are restricted to type-revelation mechanisms and agents behave truthfully in every continuation equilibrium. At the same time, the example further illustrates the logic underlying Proposition 1. Indeed, the payoff attainable by any principal when he deviates to an arbitrary indirect mechanism, and his rivals use type-revelation mechanisms, could have been achieved had he deviated to an incentive compatible mechanism, making a crucial use of private recommendations.

Example 3
Let I = J = 2. Denote the principals as P1 and P2, and the agents as A1 and A2. The allocation spaces are Y1 = {y11 , y12 , y13 , y14 } for P1, and Y2 = {y21 , y22 , y23 , y24 } for P2. Each agent can be of two types, and 1 = 2 = 1 , 2 . Agents types are perfectly correlated, thus the
11 Extending our notion of incentive compatible mechanisms by letting agents communicate not only their type but also the realizations of the recommendations sent by the other principals, would induce the innite regress problem discussed by Epstein and Peters (1999) seriously limiting the applicability of our results.

16

two states of the world are =

1 , 1 , 2 , 2

; in addition, we take prob 1 , 1 =

prob 2 , 2 = 0.5. The payoffs of the game are represented in the two tables below. In each table, the rst payoff is that of P1, who chooses the row, the second payoff is that of P2, who chooses the column, and the last two payoffs are those of A1 and A2, respectively. The rst table shows the payoffs corresponding to the state 1 , 1 : y21 y11 (, 0, 1, 1) y12 y13 y14 (, 0, 11, 0) (, 0, 0, 0) (16, 0, 15, 10) y22 (, 0, 0, 0) (, 0, 1, 1) (16 + , 0, 10, 15) (, 0, 0, 9) y23 (, 0, 0, 9) (16 + , 0, 10, 15) (, 0, 1, 1) (, 0, 0, 0) y24 (16, 1, 15, 10) (, 0, 0, 0) (, 0, 11, 0) (a, 0, 1, 1)

Table 5: Players payoffs in state 1 , 1

The second table shows the payoffs corresponding to the state 2 , 2 : y21 y11 (, 0, 1, 1) y12 y13 y14 (, 0, 11, 0) (, 0, 0, 0) (16, 1, 15, 10) y22 (, 0, 0, 0) (, 0, 1, 1) (16 + , 0, 10, 15) (, 0, 0, 9) y23 (, 0, 0, 9) (16 + , 0, 10, 15) (, 0, 1, 1) (, 0, 0, 0) y24 (16, 0, 15, 10) (, 0, 0, 0) (, 0, 11, 0) (, 0, 1, 1)

Table 6: Players payoffs in state 2 , 2

Observe that only P2s preferences are state-dependent. That is, incomplete information is neither affecting the agents behaviors nor the P1s one. In addition, arbitrarily close to zero. We postulate that each agent always participates with both principals. This is essentially done to simplify the exposition, and it is in line with the approach followed in standard gametheoretic examples of competing mechanism games.12 For the purpose of the example, a type revelation mechanism proposed by principal j is hence any mapping j : i (Y j ). We develop our argument via a series of claims.
iI

R+ is taken to be

Claim 1 Suppose both principals are restricted to offering type-revelation mechanisms. Then, if is small enough, the prole of payoffs (16, 1, 15, 10) can be supported in an equilibrium in which principals play a pure strategy and agents truthfully reveal their type.
12 See

the examples proposed in Martimort and Stole (2002), Peters (2001) and Han (2007), among others.

17

 Proof. Consider the following behaviors. P1 selects the mechanism 1 : y11 y 13 = y12 y
14

if he receives the message 1 from both A1 and A2 if he receives 1 from A1 and 2 from A2 if he receives 2 from A1 and 1 from A2 if he receives the message 2 from both A1 and A2

1 m1 , m2 1 1

P2 selects the mechanism 2 : y24 y 23 = y22 y

21

if he receives the message 1 from both A1 and A2 if he receives 1 from A1 and 2 from A2 if he receives 2 from A1 and 1 from A2 if he receives the message 2 from both A1 and A2

2 m1 , m2 2 2

Given the mechanisms 1 and 2 , agents play a continuation game over messages. In this example, the agents payoffs associated to this message game are independent of whether 1 , 1 or 2 , 2 realizes. They are represented in the following table where the rst element in each cell denotes the payoff to A1 who chooses the row, and the second element denotes the payoff to A2.

1 , 2 1 , 2 1 , 1 2 , 2 2 , 1 (1, 1) (0, 9) (11, 0) (10, 15)

1 , 1 (0, 0) (15, 10) (1, 1) (0, 0)

2 , 2 (0, 0) (1, 1) (15, 10) (0, 0)

2 , 1 (10, 15) (11, 0) (0, 9) (1, 1)

Table 3: Agents payoffs in the continuation game induced by 1 and 2

One can check that there is a continuation equilibrium where both agents truthfully reveal their types to each of the principals: if 1 , 1 realizes, then both A1 and A2 truthfully reveal 1 to P1 and P2; that is: m1 = 1 m1 = 1 and m2 = m2 = 1 ; 2 1 2 if 2 , 2 realizes, then both A1 and A2 truthfully reveal 2 to P1 and P2; that is: m1 = 1 m1 = 2 and m2 = m2 = 2 . 2 1 2 18

These behaviors induce the prole of payoffs (16, 1, 15, 10). We now show that none of the principals can gain by deviating towards an alternative type-revelation mechanism. Since P2 is getting his maximal payoff of 1, one should only consider deviations of P1. Consider rst the case in which P1 deviates proposing a single take-it or leave-it offer to agents, irrespective of the received messages. We take this deviation to be y1 ; if y1 is a deterministic offer, four alternative continuation games are induced. Following a deviation towards y1 {y11 , y12 , y13 , y14 }, the agents strategically set the messages to be sent to P2 who sticks to his equilibrium mechanism 2 . The corresponding agents payoffs are represented in the four tables below. y1 = y11 m2 2 m2 1 = 1 = 2 m2 2 = 1 2 1 m2 = 2 (1, 1) 1 (0, 9) y1 = y13 2 2 1 (0, 0) (1, 1) 1 (10, 15) (11, 0) 1 (0, 0) (15, 10) y1 = y12 2 (11, 0) (10, 15) y1 = y14 2 2 (15, 10) (0, 0) 1 (0, 9) (1, 1) 1 (1, 1) (0, 0)

We argue that there is no continuation game yielding a payoff strictly greater than 16 to P1. More precisely, 1. If y1 = y11 , the agents continuation game admits only one Nash equilibrium: both A1 and A2 report 1 to P2. The corresponding payoff to P1 is 16. 2. If y1 = y12 , the agents continuation game admits only one Nash equilibrium: both A1 and A2 report 2 to P2. The corresponding payoff to P1 is . 3. If y1 = y13 , the agents continuation game admits only one Nash equilibrium: both A1 and A2 report 1 to P2. The corresponding P1 payoff is . 4. If y1 = y14 , the agents continuation game admits only one Nash equilibrium: both A1 and A2 report 2 to P2. The corresponding payoff to P1 is 16. Suppose now that P1 deviates toward a stochastic take-it or leave-it offer (i.e. a randomization over {y11 , y12 , y13 , y14 }), and consider the continuation game induced by such a stochastic offer. One can check that if agents coordinate on a pure strategy equilibrium, then can always be chosen low enough to guarantee that P1 cannot achieve a payoff strictly greater than 19

16. The only way for P1 to gain is therefore to have agents playing a mixed strategy in the continuation game. Let 1k , with k = 1, 2, 3, 4 be the probability to play y1k in the randomization selected by P1. For a deviation to be protable one should have (12 + 13 ) > 0, otherwise P1 will not achieve a payoff greater than 16. Once again, it can be checked that, in any of such mixed strategy equilibria, the level of can be xed to be small enough to make the deviation unprotable.13 Finally, we argue that there is no need to consider deviations to more sophisticated typerevelation and truthful mechanisms, which assign different actions to different prole of types declared by agents, for P1. Let assume that P1 plays the truthful mechanism 1 , which is such that 1 1 , 1 = y and 1 2 , 2 = y, where y and y are lotteries over the decision set Y1 . Since 1 is truthful and types are perfectly correlated, each agent sends the message i to P1 when the state of the world is i , i , with i = 1, 2. If the state of the world is 1 , 1 , both agents anticipate that y will be implemented. They hence behave in the same way as if they were only proposed the take-it or leave-it offer y. Analogously, when the state of the world is 2 , 2 , the corresponding agents behaviors could be reproduced by making them only the take-it or leave-it offer y. Since there are no protable deviations through take-it or leave-it offers, and given that P1s preferences are type-independent (i.e. he cannot benet by making losses on some types and gains on others), no protable deviation towards an arbitrary typerevelation mechanism is possible. Claim 2 Suppose P2 keeps playing the same type-revelation mechanism 2 . Then, P1 can profitably deviate to an alternative mechanism attaining a payoff strictly higher than 16. Following this deviation, both agents will lie with a strictly positive probability. Proof. Suppose that P1 proposes the mechanism:

1 m1 , m2 1 1

y11 y 12 = y13 y 14

if he receives the message 1 from both A1 and A2 if he receives 1 from A1 and 2 from A2 if he receives 2 from A1 and 1 from A2 if he receives the message 2 from both A1 and A2

The new array of mechanisms { 1 , 2 } induces the following message game among agents:
that when the probability 12 + 13 approaches zero, agents will play a pure strategy equilibrium yielding a payoff strictly smaller than 16 to P1.
13 Observe

20

1 , 2 1 , 2 1 , 1 2 , 2 2 , 1 (1, 1) (0, 9) (0, 0) (1, 1)

1 , 1 (0, 0) (15, 10) (10, 15) (11, 0)

2 , 2 (11, 0) (10, 15) (15, 10) (0, 0)

2 , 1 (1, 1) (0, 0) (0, 9) (1, 1)

Table 4: Agents payoffs in the continuation game induced by { 1 , 2 }.

Observe that the strategies 1 , 2 and 2 , 1 are strictly dominated for both agents, hence we can eliminate them. In the reduced game, there is no equilibrium in pure strategies. The unique mixed-strategy Nash equilibrium prescribes that: Agent 1 mixes between 1 , 1 and 2 , 2 with equal probabilities. Agent 2 mixes between 1 , 1 and 2 , 2 with equal probabilities. Simple computations show that these strategies give to principal P1 a payoff strictly greater than 16. With some strictly positive probability, the mechanism offered by P1 induces the agents to send contradicting information to the principals: one agent will send the message 1 , while the other sends the message 2 . Hence, the mechanism offered by P1 does not induce truthful information revelation. The above reasoning can be interpreted in the light of Proposition 1. In particular, the prof itable deviation 1 can be reproduced by P1 if he makes use of a direct incentive compatible mechanism. Given P2s equilibrium mechanism, we now suppose that P1 has the possibility to send private recommendations to the agents over the messages that they send to P2. Then, P1 can offer the mechanism 1 dened as: P1 (1 , 1 ) = 1/4, P ( , ) = 1/4, 1 1 2 1 = P1 (2 , 1 ) = 1/4, P ( , ) = 1/4,
1 2 2

( , ) 1 , 2

(y11 ; 1 , 1 , , ) = 1 (y12 ; 1 , 2 , , ) = 1 (y13 , 2 , 1 , , ) = 1 (y14 , 2 , 2 , , ) = 1.

In the mechanisms 1 , P1 uses a very simple form of recommendations: he sends only one private signal to each of the agents, irrespective of their type.14 Private recommendations, however, are a key ingredient of 1 : if A1 receives the recommendation 1 from P1, she believes with probability 1/2 that A2 has received the recommendation 1 and that P1 will take the
14 To

simplify notation, we denote i with i = 1, 2 a vector of two elements, each equal to i .

21

action y11 . With the same probability, she believes that A2 has received the recommendation 2 and that P1 will take the action y12 . Hence, it is optimal for her to report 1 to P2. Following a similar reasoning, it can be checked that the direct mechanism 1 is incentive compatible and that it guarantees to P1 a payoff strictly greater than 16. The example stresses that if P1 introduces some uncertainty over the decisions he is effectively selecting, by inducing a mixed-strategy equilibrium in the agents continuation game, he can get a higher payoff. The peculiarity of the example is that this uncertainty cannot be mapped into a type-revelation mechanism; thus, given the mechanisms proposed by his opponents, a single principal can strictly gain through non-truthful mechanisms. The presence of several agents is crucial to get the result. In a single agent environment, provided that all principals are playing a pure strategy, uncertainty is fully revealed at equilibrium: the best reply to any array of mechanisms can always be formulated as a type-revelation mechanism.15 More generally, the example suggests that the standard methodology developed to characterize pure strategy equilibria in common agency games of incomplete information does not extend to multiple agent environments.16

Conclusion

This paper contributes to analyze multiple-principal multiple-agent games of incomplete information. We introduce a class of direct incentive compatible mechanisms that are robust against unilateral deviations towards more sophisticated communication schemes. These mechanisms have a clear analogy with those originally employed by Myerson (1982), since they rely on two-sided communication between principals and agents. Indeed, from the viewpoint of each principal, the agents messages to his rivals can be interpreted as hidden actions; hence there is room for (private) recommendations from principals to agents. The methodology we propose has the advantage of being easy to apply. Our analysis also shows that it is not easy to nd a simpler characterization device of pure strategy equilibrium outcomes. In particular, we show that, in games with several agents, there is little rationale to restrict principals to the simpler class of type-revelation and truthful mechanisms which has been widely used in common agency. A natural implication of our analysis would be to derive some novel insights on the properties of equilibria in economic applications of competing mechanism games of incomplete information.
15 Theorem 16 Most

2 in Peters (2003) formalizes this intuition. economic applications of common agency under incomplete information construct the best response of each principal to any given prole of his competitors mechanisms by looking at the simple menus generated by type-revelation and truthful mechanisms. See Martimort and Stole (2009) for an exposition of this methodology.

22

References
ATTAR , A., E. C AMPIONI , G. P IASER , AND U. R AJAN (2010): On Multiple Principal, Multiple Agent Models of Moral Hazard, Games and Economic Behavior, 68(1), 376380. ATTAR , A., T. M ARIOTTI , AND F. S ALANIE (2011): Non Exclusive Competition in the Market for Lemons, Econometrica, 79(6), 18691918. (2012): Non Exclusive Competition under Adverse Selection, Mimeo, Toulouse School of Economics. B IAIS , B., D. M ARTIMORT, AND J.-C. ROCHET (2000): Competing mechanisms in a common value environment, Econometrica, 78(4), 799837. B OND , E., AND T. G RESIK (1996): Regulation of multinational rms with two active governments: A common agency approach, Journal of Public Economics, 59(1), 3353. C ALZOLARI , G. (2004): Incentive Regulation of Multinational Enterprises, International Economic Review, 45(1), 257282.
D A SPREMONT,

C., AND R. D OS S ANTOS F ERREIRA (2010): Oligopolistic competition as a common agency game, Games and Economic Behavior, 70(1), 2133.

E LLISON , G., D. F UDENBERG , AND M. M BIUS (2004): Competing auctions, Journal of the European Economic Association, 2(1), 3066. E PSTEIN , L. G., AND M. P ETERS (1999): A revelation principle for competing mechanisms, Journal of Economic Theory, 88(1), 119160. G AL -O R , E. (1997): Multiprincipal agency relationships as implied by product market competition, Journal of Economics & Management Strategy, 6(1), 235256. H AN , S. (2007): Strongly Robust Equilibrium and Competing Mechanism Games, Journal of Economic Theory, 137, 610626. (2011): Implicit Collusion in Non-Exclusive Contracting under Adverse Selection, mimeo, McMaster University. K HALIL , F., D. M ARTIMORT, AND B. PARIGI (2007): Monitoring a common agent: Implications for nancial contracting, Journal of Economic Theory, 135(1), 3567. L AFFONT, J., AND J. P OUYET (2004): The subsidiarity bias in regulation, Journal of Public Economics, 88(1-2), 255283. M ARTIMORT, D., AND S. P ICCOLO (2010): The Strategic Value of Quantity Forcing Contracts, American Economic Journal: Microeconomics, 2(1), 204229. M ARTIMORT, D., AND A. S EMENOV (2008): The informational effects of competition and collusion in legislative politics, Journal of Public Economics, 92(7), 15411563. 23

M ARTIMORT, D., AND L. A. S TOLE (2002): The revelation and delegation principles in common agency games, Econometrica, 70(4), 16591673. (2003): Contractual Externalities and Common Agency Equilibria, The BE Journal of Theoretical Economics, 3(1). (2009): Market participation in delegated and intrinsic common-agency games, The Rand Journal of Economics, 40(1), 78102. M C A FEE , P. (1993): Mechanism design by competing sellers, Econometrica, 61, 12811312. M YERSON , R. B. (1982): Optimal coordination mechanisms in generalized principal-agent problems, Journal of Mathematical Economics, 10, 6781. O LSEN , T., AND P. O SMUNDSEN (2001): Strategic tax competition; implications of national ownership, Journal of Public Economics, 81(2), 253277. P ECK , J. (1997): A note on competing mechanisms and the revelation principle, mimeo, Ohio State University. P ETERS , M. (2001): Common Agency and the Revelation Principle, Econometrica, 69(5), 13491372. (2003): Negotiation and take-it or leave-it in common agency, Journal of Economic Theory, 111(1), 88109. P ETERS , M., AND S. S EVERINOV (1997): Competition among sellers who offer auctions instead of prices, Journal of Economic Theory, 75(1), 141179. S TOLE , L. (1995): Nonlinear pricing and oligopoly, Journal of Economics & Management Strategy, 4(4), 529562.

24