Alternative Method to Resolve the Principal–Principal Conflict—A New Perspective Based on Contract Theory and Negotiation

Liquidated damages mechanisms have been analyzed from a legal perspective and applied to real-world contracts. Due the lack of application LDs common agency theory, this research explores whether liquidated mechanism can resolve principal–principal conflicts under agency. We combine moral hazard model with non-cooperative dynamic game theory analyze influence on agent principals condition complete information incomplete information. find that are key factors affecting optimal contract between principal agent. Since does not terminate current contract, conflict arises when another wishes enter into new terminates existing signs one principal. The injured party requires breaching party. Therefore, they will negotiate number damages. cause bargaining generate unique subgame perfect Nash equilibrium sequential equilibrium. prove only belong specific interval generating Pareto solutions solve exist. A way is ensuring minority subordinate majority. For first time, we study how solves multi-principal conflict. This be used our paper expands method resolving extends agency; show delegation process. Our various situations provide rational decision-making basis for participants.