Sequential Common Agency: The Revelation Principle

Abstract

The paper extends the Revelation Principle to sequential common agency games under asymmetric information. Each period a principal contracts with a common agent. An implemented allocation is observed by other principals. Depending on whether the message reported by the agent to a principal is observed by other principals, we distinguish between private and public communication. Under private communication, the Revelation Principle applies, but optimal contracts are stochastic. However, the dimension of the support of an equilibrium contract does not exceed the number of types that achieve this stage with a positive probability. Under public communication, the reporting strategy of agent is stochastic, but the true type is reported with a positive probability. We demonstrate that the two regimes are equivalent in that they result in the same distribution of allocations. The results hold when the agent's type is not persistent, or the outcome of the contract is observed with noise.