Abstract
This study aims to find new theoretical insights about adverse selection in both monopoly and common agency problems by combining the classical principal-agent framework with Fehr&Schmidt's (1999) type of other-regarding preferences. We first show that other-regarding preferences change optimal quality (quantity) relative to the self-interested case. In monopoly, we first characterize the equilibrium and show inefficient allocations can be less distorted downwards than the self-interested model due to competitive and aversion rents. We also increase the competition by introducing the common agency framework and extend Martimort and Stole's (2009) model. In the common agency part, we also show how optimal quality (quantity) and market participation change with other-regarding preferences.