Strotz (1956) and Pollak (1968) were among the first to study the behaviour of an economic agent whose preferences change over time. They suggested that such an agent would choose a “consistent plan” which they described as “the best plan that he would actually follow”. A Markov-consistent plan has a particularly simple structure: current decisions are independent of past decisions, except insofar as past decisions affect the current values of state variables. Unfortunately, Markov-consistent plans do not generally exist. In this paper, we demonstrate that the existence problem dissappears for finite horizon problems when one introduces even a small amount of smooth uncertainty into production.

In many examples of competitive bidding (e.g., government construction contracting) the relevant object is either partially divisible or ill-defined, in contrast to much of the recent theoretical work on auctions. In this paper we consider a more general class of auctions, in which bidders name a “menu” of offers for various possible actions (allocations) available to the auctioneer. We focus upon “first-price” menu auctions under the assumption of complete information, and show that, for an attractive refinement of the set of Nash Equilibria, an efficient action always results. Our model also has application to situations of economic influence, in which interested parties independently attempt to influence a decision-maker's action.

[We extend the principal-agent framework with risk-neutral principals to situations in which several principals simultaneously and independently attempt to influence a common agent. We show that implementation is, in the aggregate, always efficient (cost-minimizing), and that noncooperative behavior induces an efficient (potentially second-best) action choice if and only if collusion among the principals would implement the first-best action at the first-best level of cost. We also investigate the existence of equilibria, the distribution of net rewards among principals, the characteristics of actions chosen in inefficient equilibria, and potential institutional remedies for welfare losses induced by noncooperative behavior.]