The Principal-Agent Matching Market
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Kaniska Dam
Abstract
We propose an agency model based on competitive markets in order to analyse an economy with several homogeneous principals and heterogeneous agents. We model the principal-agent economy as a two-sided matching game and characterise the set of stable outcomes (equilibria) of this market. In this regard we generalise the assignment game of Shapley and Shubik (1972). Unlike in the standard principal-agent theory, equilibrium payoffs of all the individuals are endogenous, equilibrium contracts are Pareto optimal, and the incremental surplus generated in a principal-agent relationship accrues to the tenant. We design a simple non-cooperative game which implements the set of stable outcomes in subgame perfect equilibrium. We also suggest policy measures in relation to efficiency and income distribution.
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
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Articles in the same Issue
- Equilibrium Departures from Common Knowledge in Games with Non-Additive Expected Utility
- Bargaining over Risky Assets
- Private Strategies in Finitely Repeated Games with Imperfect Public Monitoring
- Regulation by Negotiation: the Private Benefit Bias
- Joint Liability and Peer Monitoring under Group Lending
- The Noisy Duopolist
- Spontaneous Market Emergence
- A Simple Linear Programming Approach to Gain, Loss and Asset Pricing
- Forward Discount Bias, Nalebuff's Envelope Puzzle, and the Siegel Paradox in Foreign Exchange
- Risk Averse Supervisors and the Efficiency of Collusion
- Advances Article
- The Principal-Agent Matching Market
