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Robust predictions for bilateral contracting with externalities. (English) Zbl 1152.91630
Summary: The paper studies bilateral contracting between one principal and \(N\) agents when each agent’s utility depends on the principal’s unobservable contracts with other agents. We show that allowing deviations to menu contracts from which the principal chooses bounds equilibrium outcomes in a wide class of bilateral contracting games without imposing ad hoc restrictions on the agents’ beliefs. This bound yields, for example, competitive convergence as N 8 in environments in which an appropriately-defined notion of competitive equilibrium exists. We also examine the additional restrictions arising in two common bilateral contracting games: the “offer game” in which the principal makes simultaneous offers to the agents, and the ”bidding game” in which the agents make simultaneous offers to the principal.

91B40 Labor market, contracts (MSC2010)
91A10 Noncooperative games
91B26 Auctions, bargaining, bidding and selling, and other market models
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