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Common agency and computational complexity: theory and experimental evidence

Kirchsteiger, G. and Prat, Andrea (1999) Common agency and computational complexity: theory and experimental evidence. 36. Center for Economic Research, Tilburg University, Tilburg, The Netherlands.

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Abstract

In a common agency game, several principals try to in°uence the behavior of an agent. Common agency games typically have multiple equilibria. One class of equilibria, called truthful, has been identi¯ed by Bernheim and Whinston and has found widespread use in the political economy literature. In this paper we identify another class of equilibria, which we call natural. In a natural equilibrium, each principal o®ers a strictly positive contribution on at most one alternative. We show that a natural equilibrium always exists and that its computational complexity is much smaller than that of a truthful equilibrium. To compare the predictive power of the two concepts, we run an experiment on a common agency game for which the two equilibria predict a di®erent equilibrium alternative. The results strongly reject the truthful equilibrium. The alternative predicted by the natural equilibrium is chosen in 65% of the matches, while the one predicted by the truthful equilibrium is chosen in less than 5% of the matches.

Item Type: Monograph (Discussion Paper)
Official URL: http://center.uvt.nl
Additional Information: © 1999 the authors
Library of Congress subject classification: H Social Sciences > HB Economic Theory
Sets: Collections > Economists Online
Departments > Economics
Research centres and groups > Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD)
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: 36
Date Deposited: 02 Jun 2008 13:02
URL: http://eprints.lse.ac.uk/5235/

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