This paper characterizes the equilibrium sets of common agency games with direct externalities between principals when they compete with nonlinear prices. Direct externalities arise when the contracting variable of one principal directly affects the other principal's payoff. First, we...

Abstract This paper studies the efficiency of collusion between supervisors and supervisees. Building on Tirole (1986)'s results that deterring collusion with infinitely risk averse supervisors is impossible, while it is costless to do so under risk neutrality, we develop here a theory of...