Agency Games

In this paper, we study the effect of combining two forms of economic interactions, namely a contractual relationship and a game, systematically. We compare several models with different market structures involving Cournot competition between firms in which at least one of the firms is in an agency relationship. To provide a benchmark, we also present the typical agency model in which the agent is a monopolist. The models presented here differ from each other not only in terms of their market structure but also in terms of their informational structure. Indeed, the purpose of this paper is to examine the effect of these informational differences on the equilibrium contract, especially the effect that information has on the outputs of the different types of agents. In the process, we apply some of the results in this paper to the problem of non-linear pricing. In particular, we provide a simple duopoly version of non-linear pricing