Multi-Contracting Mechanism Design

Multi-contracting practices prevail in many organizations be they public (governments) or private (markets). This article surveys the literature on common agency, a major example of such multi-contracting settings. I first highlight some specific features of common agency games that distinguish them from centralized contracting. Then, I review the tools needed to describe allocations which are implementable as common agency equilibria. Economic examples are used to characterize equilibria under both complete and asymmetric information. Particular focus is put on the multiplicity problem and the (interim) efficiency properties of those equilibria. The comparison of those equilibria with the outcomes achieved under centralized contracting allows us to assess the transaction costs of multi-contracting. I also argue that, in some specific contexts, common agency may implement the optimal outcome that would be achieved under centralized contracting if collusion between agents were an issue. More generally, common agency might outperform centralized contracting when either collusion or limited commitment matters.