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Cooperative interim contract and re-contract: Chandler’s M-form firm

  • Tatsuro Ichiishi
  • Murat R. Sertel
Chapter
Part of the Studies in Economic Theory book series (ECON.THEORY, volume 19)

Summary

At an interim stage players possessing only their private information freely communicate with each other to coordinate their strategies. This results in a core strategy, which is interpreted as an equilibrium set of players’ alternative type-contingent contract offers to their fellows. From this set of offers each player then chooses an optimal one and engages in some subsequent action, thus possibly revealing some private information to the others. Now with new information thus obtained from each other, the players play a new game to re-write their contract. In all of the optimization and gaming just described, Bayesian incentive compatibility plays a central role. These ideas are formulated within a model of a profit-center game with incomplete information which formally describes interaction of the asymmetrically informed profit-centers in Chandler’s multidivisional firm.

Keywords

Private Information Incomplete Information Interim Period Grand Coalition Market Commodity 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer-Verlag Berlin Heidelberg 2005

Authors and Affiliations

  • Tatsuro Ichiishi
    • 1
    • 2
  • Murat R. Sertel
    • 2
    • 3
  1. 1.Department of EconomicsOhio State UniversityColumbusUSA
  2. 2.Center for Economic DesignBoğaziçi UniversityTurkey
  3. 3.Department of Economics, Faculty of Economic and Administrative SciencesBoğaziçi UniversityBebek - IstanbulTurkey

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