The timing of contracting with externalities |
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Authors: | Marc Möller |
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Institution: | Department of Economics, University Carlos III de Madrid, Calle Madrid 126, 28903 Getafe Madrid, Spain |
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Abstract: | This paper endogenizes the timing of bilateral contracting between one principal and multiple agents in the presence of externalities. Contracting simultaneously with all agents is optimal for the principal if externalities become weaker the more an agent trades. If instead externalities become stronger, sequential negotiations might benefit the principal as they lower the agents’ outside options. Under some linearity conditions, the principal's preferences with respect to different timings of contracting are opposed to their efficiency ranking. |
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Keywords: | C78 D62 L14 |
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