The Politics of Collective Principals

We study a dynamic principal-agent model in which the principal is a group whose members
hold heterogeneous and evolving values from an agreement with the agent. The principals
collectively choose the agent’s offer, which binds all principals if the agent accepts.
Learning about the agent’s private information reduces the principals’ conflicts over their
joint offer, mitigating a principal’s subsequent losses if she is not decisive. As a consequence,
a principal in a group prefers to screen the agent more aggressively than a single principal.
We study the dynamics of the principals’ collective choice, and obtain conditions under which
decisive members of the group successively trade away their decision-making authority, leading
inexorably to the concentration of negotiation power in the hands of a single principal.