On some agency costs of intermediated contracting

This paper identifies a new agency cost of intermediated contracting. A non productive intermediary can extract some rents when (a) the productive agent has some private information and (b) the intermediaryʹs sub-contract with the productive agent is not directly controlled by the top principal. We show that the intermediaryʹs informational rent is an increasing and concave function of the productive agentʹs own informational rent.