Interacting mechanisms: A perspective on generalized principal–agent problems

Abstract

Myerson (1982) formalizes general principal–agent problems, in which agents have private information and choose actions. His contribution is best known for a version of the revelation principle in the case of a single principal but he also introduces a model of interacting principals. We push the latter forward by studying the perfect Bayesian equilibrium outcomes of the corporations’ game in which every principal proposes a mechanism to his agents. We show that several versions of the revelation principle hold in our framework and that, under certain conditions, every principals’ equilibrium, as defined in Myerson (1982), is a perfect Bayesian equilibrium outcome of the corporations’ game.