On some agency costs of intermediated contracting

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Publication Details

Output type: Journal article

Author list: Faure-Grimaud A, Martimort D

Publisher: Elsevier

Publication year: 2001

Journal: Economics Letters (0165-1765)

Volume number: 71

Issue number: 1

Start page: 75

End page: 82

Number of pages: 8

ISSN: 0165-1765

eISSN: 1873-7374

Languages: English-Great Britain (EN-GB)

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Open access status: closed

Abstract

This paper identifies a new agency cost of intermediated contracting. A non productive intermediary can extract some rents when (a) the productive agent has some private information and (b) the intermediary's sub-contract with the productive agent is not directly controlled by the top principal. We show that the intermediary's informational rent is an increasing and concave function of the productive agent's own informational rent. (C) 2001 Elsevier Science B.V. All rights reserved.

Keywords

adverse selection, delegation, intermediation, transaction cost

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