Econometrica: Jul, 2003, Volume 71, Issue 4

Games Played Through Agents

https://doi.org/10.1111/1468-0262.00437
p. 989-1026

Andrea Prat, Aldo Rustichini

We introduce a game of complete information with multiple principals and multiple common agents. Each agent makes a decision that can affect the payoffs of all principals. Each principal offers monetary transfers to each agent conditional on the action taken by the agent. We characterize pure‐strategy equilibria and we provide conditions—in terms of game balancedness—for the existence of an equilibrium with an efficient outcome. Games played through agents display a type of strategic inefficiency that is absent when either there is a unique principal or there is a unique agent.