Principal-Agent model: Hidden Information
|
|
- Beverley Gray
- 5 years ago
- Views:
Transcription
1 Principal-Agent model: Hidden Information Laont-Martimort, ch 2,3 Agent is the producer who will produce q units of the good for the principal rm-regulator or worker - employer Principal's utility is V (q; t) = S(q) t Agent's high marginal cost 2 f, g
2 Probability of low marginal cost is v C(q; ) = q + F = Agent has outside option { reservation utility { normalized to zero. Game as follows: 1. Nature chooses type of agent. 2. A observes his own type, principal does not
3 3. P oers contract 4. A accepts or rejects contract 5. If A accepts, contract is executed. Contract oered at interim stage, when there is already asymmetric information, P has full commitment. t(q): q is veriable, so principal can promise any transfer First Best Benchmark: Complete information Output levels q; q :
4 S 0 (q) = S 0 (q) = t = q + F S(q) t = q + F Second Best: Asymmetric Information
5 Contract is a menu (q; t; q; t) First contract for low cost agent. Second for high cost agent Menu of contracts is incentive compatible if the high cost type weakly prefers (q; t), and the low cost type weakly prefers (q; t) t q t q (ICH) t q t q (ICL)
6 Participation constraint: Each type of agent must nd it optimal to accept the contract t q 0 (PCH) t q 0 (PCL) An incentive feasible contract satises IC and PC for both types of agent. From ICH and ICL,
7 t t (q q) t t (q q) This implies ( )(q q) 0 q q
8 ICL + ICH ) monotonicity constraint Any pair q; q that is implementable must satisfy this constraint. Conversely, for any pair q q; we can nd transfers that satisfy ICL and ICH. Principal's problem: n max v[s(q) t] + (1 v)[s(q) t] o q;t;q;t subject to ICL, PCL, ICH, PCH.
9 Agent's information rent is U = t q U = t q Rewrite the P's max problem as:
10 max U;q; U;q V = n v[s(q) q] + (1 v)[s(q) q] o n vu + (1 v) U o U U + q (ICL') U U q (ICH') U 0 (PCH')
11 U 0 (PCL')
12 If PCH' is satifsed, then PCL' is satised. If ICL' is satised and binds, then ICH' is satised. So relevant constraints are ICL and PCH Both constraints must be binding at optimum. max q;q V = n v[s(q) q] + (1 v)[s(q) q] o fv qg S 0 (q ) =
13 (1 v)[s 0 (q ) ] = v Under asymmetric information, the optimal contract has: 1) no distortion for the ecient type. 2) downward output distortion for the high cost type 3) informational rent for the ecient type = q 4) no informational rent for the high cost type
14 Continuum of types Agent's high marginal cost 2 [, ] Distributed with density function f(:) and cdf F (:) C(q; ) = q + F Agent has outside option { reservation utility { normalized to zero. Game as follows:
15 1. Nature chooses type of agent. 2. A observes his own type, principal does not 3. P oers contract: direct revelation mechanism, fq(~ ); t( ~ )g 4. A accepts or rejects contract 5. If A accepts, he announces type. Contract is executed. Contract oered at interim stage, when there is already asymmetric information, P has full commitment. t(q): q is veriable, so principal can promise any transfer
16 Menu of contracts is incentive compatible if for all ; ~ : t() q() t(~ ) q( ~ ) (IC) Write IC for ~ t(~ ) ~ q( ~ ) t() ~ q() Adding these together we get: ( ~ )[q() q( ~ )] 0
17 Monotonicity requirement: q() is decreasing (weakly) Hence q() is dierentiable almost everywhere (as is t()) Given a direct revelation mechanism, agent of type chooses announcement ^ to maximize u(; ^) = = t 0 (^) q 0 (^) This must equal zero at ^ = ; i.e. truth telling must be optimal
18 Local Incentive Compatibility : rst order condition t 0 () q 0 () = 0 Second order condition: t 00 () q 00 () 0 Second order condition will be satised if monotonicity is satised:
19 q 0 () 0 (totally dierentiate rst order condition) t 00 () q 00 () q 0 () = 0 Global incentive compatibility t() t ~ = Z ~ t 0 (x)dx
20 = Z ~ xq 0 (x)dx Z = [xq(x)] ~ q(x)dx ~ t() t ~ = q() ~ q( ~ ) Z ~ q(x)dx t() q() = t ~ q(~ ) + ( ~ )q( ~ ) Z ~ q(x)dx ( ~ )q( ~ ) Z ~ q(x)dx 0
21 LIC rst order condition + monotonicity, global incentive compatibility Participation constraint: for all U() = t() q() 0 U 0 () = t 0 () q 0 () q() = q() from LIC Principal's problem:
22 Z max q();u() [S(q()) q() U()]f()d subject to U 0 () = q() q 0 () 0 U() 0
23 No rent for highest cost type, i.e. U( ) = 0 Ignore monotonicity constraint. U() = U( ) Z = Z q(x)dx U 0 (x)dx max q() Z ( S(q()) q() Z q(x)dx ) f()d
24 Dene Q() = R q(x)dx Z Q()f()d = [Q()F ()] Z q()f ()d max q() Z ( S(q()) " + F () f() # q() ) f()d S 0 (q()) = + F () f() Check that this satises monotonicity condition
25 Monotone hazard rate property hazard rate is h() = f() 1 F () If this is increasing, then q() will be increasing. Under asymmetric information, the optimal contract has: 1) no distortion for the most ecient type. 2) downward output distortion for all other types 3) informational rent for all types except most inecient type
Some Notes on Adverse Selection
Some Notes on Adverse Selection John Morgan Haas School of Business and Department of Economics University of California, Berkeley Overview This set of lecture notes covers a general model of adverse selection
More informationECON INFORMATION ECONOMICS. Lecture 2 February 2016 Slides based on Laffont & Martimort UiO, Spring 2016
ECON4240 - INFORMATION ECONOMICS Lecture 2 February 2016 Slides based on Laffont & Martimort UiO, Spring 2016 Asymmetric information A knows his own cost-type θ P does not know the cost-type θ of A What
More informationG5212: Game Theory. Mark Dean. Spring 2017
G5212: Game Theory Mark Dean Spring 2017 Adverse Selection We are now going to go back to the Adverse Selection framework Mechanism Design with 1 agent Though that agent may be of many types Note that
More informationScreening. Diego Moreno Universidad Carlos III de Madrid. Diego Moreno () Screening 1 / 1
Screening Diego Moreno Universidad Carlos III de Madrid Diego Moreno () Screening 1 / 1 The Agency Problem with Adverse Selection A risk neutral principal wants to o er a menu of contracts to be o ered
More informationEconS Microeconomic Theory II Midterm Exam #2 - Answer Key
EconS 50 - Microeconomic Theory II Midterm Exam # - Answer Key 1. Revenue comparison in two auction formats. Consider a sealed-bid auction with bidders. Every bidder i privately observes his valuation
More informationMicroeconomic Theory (501b) Problem Set 10. Auctions and Moral Hazard Suggested Solution: Tibor Heumann
Dirk Bergemann Department of Economics Yale University Microeconomic Theory (50b) Problem Set 0. Auctions and Moral Hazard Suggested Solution: Tibor Heumann 4/5/4 This problem set is due on Tuesday, 4//4..
More informationEC476 Contracts and Organizations, Part III: Lecture 2
EC476 Contracts and Organizations, Part III: Lecture 2 Leonardo Felli 32L.G.06 19 January 2015 Moral Hazard: Consider the contractual relationship between two agents (a principal and an agent) The principal
More informationSupplementary material to Procurement with specialized firms
Supplementary material to Procurement with specialized firms Jan Boone and Christoph Schottmüller January 27, 2014 In this supplementary material, we relax some of the assumptions made in the paper and
More informationGeneral idea. Firms can use competition between agents for. We mainly focus on incentives. 1 incentive and. 2 selection purposes 3 / 101
3 Tournaments 3.1 Motivation General idea Firms can use competition between agents for 1 incentive and 2 selection purposes We mainly focus on incentives 3 / 101 Main characteristics Agents fulll similar
More informationMinimum Wages and Excessive E ort Supply
Minimum Wages and Excessive E ort Supply Matthias Kräkel y Anja Schöttner z Abstract It is well-known that, in static models, minimum wages generate positive worker rents and, consequently, ine ciently
More informationSupplementary Material for \Collusion with Persistent Cost Shocks"
Supplementary Material for \Collusion with Persistent Cost Shocks" Susan Athey and Kyle Bagwell July 3, 2006 Abstract This document has three parts. The rst part analyzes generalizations of our model to
More informationHidden information. Principal s payoff: π (e) w,
Hidden information Section 14.C. in MWG We still consider a setting with information asymmetries between the principal and agent. However, the effort is now perfectly observable. What is unobservable?
More informationGame Theory and Economics of Contracts Lecture 5 Static Single-agent Moral Hazard Model
Game Theory and Economics of Contracts Lecture 5 Static Single-agent Moral Hazard Model Yu (Larry) Chen School of Economics, Nanjing University Fall 2015 Principal-Agent Relationship Principal-agent relationship
More informationA Principal-Agent Model of Sequential Testing
A Principal-Agent Model of Sequential Testing Dino Gerardi y Lucas Maestri z December 2008 Abstract This paper analyzes the optimal provision of incentives in a sequential testing context. In every period
More informationOPTIMAL CONTROL THEORY. Preliminary and Incomplete - please do not cite
OPTIMAL CONTROL THEORY PEDRO HEMSLEY Preliminary and Incomplete - please do not cite These short notes are based on Rochet's notes for a course in dynamic optimization 1,2. They are no substitute for the
More informationA Principal-Agent Model of Sequential Testing
A Principal-Agent Model of Sequential Testing Dino Gerardi Lucas Maestri No. 115 June 2009 www.carloalberto.org/working_papers 2009 by Dino Gerardi and Lucas Maestri. Any opinions expressed here are those
More informationContracts in informed-principal problems with moral hazard
Contracts in informed-principal problems with moral hazard Nicholas C Bedard January 20, 2016 Abstract In many cases, an employer has private information about the potential productivity of a worker, who
More informationMoral Hazard. Felix Munoz-Garcia. Advanced Microeconomics II - Washington State University
Moral Hazard Felix Munoz-Garcia Advanced Microeconomics II - Washington State University Moral Hazard Reading materials: Start with Prajit Dutta, Chapter 19. MWG, Chapter 14 Macho-Stadler and Perez-Castrillo,
More informationGame Theory, Information, Incentives
Game Theory, Information, Incentives Ronald Wendner Department of Economics Graz University, Austria Course # 320.501: Analytical Methods (part 6) The Moral Hazard Problem Moral hazard as a problem of
More informationSecond-degree Price Discrimination in the Presence of Positive Network Effects
Second-degree Price Discrimination in the Presence of Positive Network Effects Gergely Csorba Central European University February 14, 2003 Abstract This paper uses tools provided by lattice theory to
More informationRegulation Under Asymmetric Information
Regulation Under Asymmetric Information Lecture 5: Course 608 Sugata Bag Delhi School of Economics February 2013 Sugata Bag (DSE) Regulation Under Asymmetric Information 08/02 1 / 50 Basic Concepts The
More informationIEOR 151 Lecture 11 Adverse Selection
IEOR 151 Lecture 11 Adverse Selection 1 Sandwich Example Consider the following hypothetical situation A company is holding a picnic and would like to purchase grilled cheese sandwiches with tomatoes and
More information1 Web Appendix: Equilibrium outcome under collusion (multiple types-multiple contracts)
1 Web Appendix: Equilibrium outcome under collusion (multiple types-multiple contracts) We extend our setup by allowing more than two types of agent. The agent s type is now β {β 1, β 2,..., β N }, where
More informationNotes on Mechanism Designy
Notes on Mechanism Designy ECON 20B - Game Theory Guillermo Ordoñez UCLA February 0, 2006 Mechanism Design. Informal discussion. Mechanisms are particular types of games of incomplete (or asymmetric) information
More informationOn the Informed Principal Model with Common Values
On the Informed Principal Model with Common Values Anastasios Dosis ESSEC Business School and THEMA École Polytechnique/CREST, 3/10/2018 Anastasios Dosis (ESSEC and THEMA) Informed Principal with Common
More informationOverview. Producer Theory. Consumer Theory. Exchange
Overview Consumer Producer Exchange Edgeworth Box All Possible Exchange Points Contract Curve Overview Consumer Producer Exchange (Multiplicity) Walrasian Equilibrium Walrasian Equilibrium Requirements:
More informationMechanism Design: Basic Concepts
Advanced Microeconomic Theory: Economics 521b Spring 2011 Juuso Välimäki Mechanism Design: Basic Concepts The setup is similar to that of a Bayesian game. The ingredients are: 1. Set of players, i {1,
More informationOnline Appendixes for \A Theory of Military Dictatorships"
May 2009 Online Appendixes for \A Theory of Military Dictatorships" By Daron Acemoglu, Davide Ticchi and Andrea Vindigni Appendix B: Key Notation for Section I 2 (0; 1): discount factor. j;t 2 f0; 1g:
More informationMonopoly Regulation in the Presence of Consumer Demand-Reduction
Monopoly Regulation in the Presence of Consumer Demand-Reduction Susumu Sato July 9, 2018 I study a monopoly regulation in the setting where consumers can engage in demand-reducing investments. I first
More informationInformed Principal in Private-Value Environments
Informed Principal in Private-Value Environments Tymofiy Mylovanov Thomas Tröger University of Bonn June 21, 2008 1/28 Motivation 2/28 Motivation In most applications of mechanism design, the proposer
More informationWARWICK ECONOMIC RESEARCH PAPERS
Regulating a Monopolist with unknown costs and unknown quality capacity Charles Blackorby and Dezsö Szalay No 858 WARWICK ECONOMIC RESEARCH PAPERS DEPARTMENT OF ECONOMICS Regulating a Monopolist with unknown
More informationWhat is Screening? Economics of Information and Contracts Screening: General Models. Monopolistic Screening: A More General Model.
Economics of Information and Contracts Screening: General Models Levent Koçkesen Koç University Levent Koçkesen (Koç University) Screening 1 / 58 What is Screening? A contracting problem with Hidden Information
More informationMoral Hazard: Hidden Action
Moral Hazard: Hidden Action Part of these Notes were taken (almost literally) from Rasmusen, 2007 UIB Course 2013-14 (UIB) MH-Hidden Actions Course 2013-14 1 / 29 A Principal-agent Model. The Production
More informationLecture Notes - Dynamic Moral Hazard
Lecture Notes - Dynamic Moral Hazard Simon Board and Moritz Meyer-ter-Vehn October 23, 2012 1 Dynamic Moral Hazard E ects Consumption smoothing Statistical inference More strategies Renegotiation Non-separable
More informationTeoria das organizações e contratos
Teoria das organizações e contratos Chapter 6: Adverse Selection with two types Mestrado Profissional em Economia 3 o trimestre 2015 EESP (FGV) Teoria das organizações e contratos 3 o trimestre 2015 1
More informationOrganization, Careers and Incentives
Organization, Careers and Incentives Chapter 4 Robert Gary-Bobo March 2018 1 / 31 Introduction Introduction A firm is a pyramid of opportunities (Alfred P. Sloan). Promotions can be used to create incentives.
More informationNotes on the Thomas and Worrall paper Econ 8801
Notes on the Thomas and Worrall paper Econ 880 Larry E. Jones Introduction The basic reference for these notes is: Thomas, J. and T. Worrall (990): Income Fluctuation and Asymmetric Information: An Example
More informationGame Theory. Monika Köppl-Turyna. Winter 2017/2018. Institute for Analytical Economics Vienna University of Economics and Business
Monika Köppl-Turyna Institute for Analytical Economics Vienna University of Economics and Business Winter 2017/2018 Static Games of Incomplete Information Introduction So far we assumed that payoff functions
More informationLecture 8: Incomplete Contracts
Lecture 8: Incomplete Contracts Cheng Chen School of Economics and Finance The University of Hong Kong (Cheng Chen (HKU)) Econ 6006 / 23 Introduction Motivation Development of microeconomics theory: General
More informationEconS Advanced Microeconomics II Handout on Mechanism Design
EconS 503 - Advanced Microeconomics II Handout on Mechanism Design 1. Public Good Provision Imagine that you and your colleagues want to buy a co ee machine for your o ce. Suppose that some of you may
More informationOn the Pareto Efficiency of a Socially Optimal Mechanism for Monopoly Regulation
MPRA Munich Personal RePEc Archive On the Pareto Efficiency of a Socially Optimal Mechanism for Monopoly Regulation Ismail Saglam Ipek University 4 May 2016 Online at https://mpra.ub.uni-muenchen.de/71090/
More informationMechanism Design: Bayesian Incentive Compatibility
May 30, 2013 Setup X : finite set of public alternatives X = {x 1,..., x K } Θ i : the set of possible types for player i, F i is the marginal distribution of θ i. We assume types are independently distributed.
More informationRevenue Maximization in Multi-Object Auctions
Revenue Maximization in Multi-Object Auctions Benny Moldovanu April 25, 2017 Revenue Maximization in Multi-Object Auctions April 25, 2017 1 / 1 Literature Myerson R. (1981): Optimal Auction Design, Mathematics
More information1.1 A Simple Model of Price Discrimination Full Information Benchmark: First-Best Outcome or Perfect Price
Contract Theory Contents 1 Hidden Information: Screening 6 1.1 A Simple Model of Price Discrimination................... 8 1.1.1 Full Information Benchmark: First-Best Outcome or Perfect Price Discrimination.............................
More informationG5212: Game Theory. Mark Dean. Spring 2017
G5212: Game Theory Mark Dean Spring 2017 Adverse Selection We have now completed our basic analysis of the adverse selection model This model has been applied and extended in literally thousands of ways
More informationArm s Length Relationships without Moral Hazard
09- Research Group: Industrial Organization November 6, 2009 Arm s Length Relationships without Moral Hazard JACQUES CRÉMER Arm s length relationships without moral hazard Jacques Crémer Toulouse School
More informationMarch 13, David Martimort, Aggey Semenov and Lars Stole
Working paper A COMPLETE CHARACTERIZATION OF EQUILIBRIA IN AN INTRINSIC COMMON AGENCY SCREENING GAME 1 March 13, 2018 David Martimort, Aggey Semenov and Lars Stole Abstract. We characterize the complete
More informationImpatience vs. Incentives
Impatience vs. Incentives Marcus Opp John Zhu University of California, Berkeley (Haas) & University of Pennsylvania, Wharton January 2015 Opp, Zhu (UC, Wharton) Impatience vs. Incentives January 2015
More informationOptimal Monopoly Mechanisms with Demand. Uncertainty. 1 Introduction. James Peck and Jeevant Rampal. December 27, 2017
Optimal Monopoly Mechanisms with Demand Uncertainty James Peck and Jeevant Rampal December 27, 2017 Abstract This paper analyzes a monopoly rm's prot maximizing mechanism in the following context. There
More informationOptimal contract under adverse selection in a moral hazard model with a risk averse agent
Optimal contract under adverse selection in a moral hazard model with a risk averse agent Lionel Thomas CRESE Université de Franche-Comté, IUT Besanon Vesoul, 30 avenue de l Observatoire, BP1559, 25009
More informationPrincipal - Agent model under screening
Principal - Agent model under screening Microeconomics 2 Presentation: Guillaume Pommey, Slides: Bernard Caillaud Master APE - Paris School of Economics March 9 (Lecture 10 and March 13 (Lecture 11, 2017
More informationA Complete Characterization of Equilibria in a Common Agency Screening Game
MPRA Munich Personal RePEc Archive A Complete Characterization of Equilibria in a Common Agency Screening Game David Martimort and Aggey Semenov and Lars Stole 16 August 2017 Online at https://mpra.ub.uni-muenchen.de/80870/
More informationThe Optimal Contract under Adverse Selection in a Moral-Hazard Model with a Risk-Averse Agent
Article The Optimal Contract under Adverse Selection in a Moral-Hazard Model with a Risk-Averse Agent François Maréchal and Lionel Thomas * CRESE EA3190, University Bourgogne Franche-Comté, F-25000 Besançon,
More informationRelying on Information Acquired by a Principal
Relying on Information Acquired by a Principal Aaron Finkle 2004 Abstract This paper analyzes situations in which a principal is able to privately gather information about a task after contracting with
More informationMarket Participation under Delegated and. Intrinsic Common Agency Games
Market Participation under Delegated and Intrinsic Common Agency Games (Preliminary) David Martimort Lars A. Stole November 25, 2003 *We are grateful to Wouter Dessein, Bruno Jullien and Canice Prendergast
More information3 Mechanism Design and Self-selection Contracts
renegotiation can be made conditional on a. Thus, the main differences are whether renegotiation takes place between asymmetrically or (sufficiently) symmetrically informed parties. 3 Mechanism Design
More informationMicroeconomics II Lecture 4: Incomplete Information Karl Wärneryd Stockholm School of Economics November 2016
Microeconomics II Lecture 4: Incomplete Information Karl Wärneryd Stockholm School of Economics November 2016 1 Modelling incomplete information So far, we have studied games in which information was complete,
More informationThe Design of Ambiguous Mechanisms
The Design of Ambiguous Mechanisms Alfredo Di Tillio Bocconi University Nenad Kos Bocconi University Matthias Messner Bocconi University and CESifo January 9, 2012 First version: April 2011 Abstract This
More informationPrincipal-Agent Games - Equilibria under Asymmetric Information -
Principal-Agent Games - Equilibria under Asymmetric Information - Ulrich Horst 1 Humboldt-Universität zu Berlin Department of Mathematics and School of Business and Economics Work in progress - Comments
More informationRegulating a multi-attribute/multi-type Monopolist
Regulating a multi-attribute/multi-type Monopolist Dezsö Szalay University of Bonn May 26, 2009 Abstract I study the regulation of a rm producing a good with two attributes, e.g. quantity and quality.
More informationgovernment a city council a rm or a household has to allocate several tasks to providers e.g. rms or employees whose true costs she does not know with
Optimal Structure of Agency with Product Complementarity and Substitutability Sergei Severinov y November 5 997 Abstract The paper investigates a typical situation that arises in procurement regulation
More informationDynamic Mechanisms without Money
Dynamic Mechanisms without Money Yingni Guo, 1 Johannes Hörner 2 1 Northwestern 2 Yale July 11, 2015 Features - Agent sole able to evaluate the (changing) state of the world. 2 / 1 Features - Agent sole
More informationOptimal Income Taxation and Public-Goods Provision with Preference and Productivity Shocks
Optimal Income Taxation and Public-Goods Provision with Preference and Productivity Shocks F. Bierbrauer March 1, 2011 Introduction Objective of the paper: Design of Optimal Taxation and Public Good provision
More informationLecture Notes in Information Economics
Lecture Notes in Information Economics Juuso Valimaki February, 2014 Abstract These lecture notes are written for a rst-year Ph.D. course in Microeconomic Theory. They are based on teaching material from
More informationVirtual Robust Implementation and Strategic Revealed Preference
and Strategic Revealed Preference Workshop of Mathematical Economics Celebrating the 60th birthday of Aloisio Araujo IMPA Rio de Janeiro December 2006 Denitions "implementation": requires ALL equilibria
More informationSome Notes on Moral Hazard
Some Notes on Moral Hazard John Morgan University of California at Berkeley Preliminaries Up until this point, we have been concerned mainly with the problem of private information on the part of the agent,
More informationECO421: Signaling. Marcin P ski. March 26, 2018
ECO421: Signaling Marcin P ski March 26, 2018 Plan Introduction Education Suits Signaling everywhere Conclusion Introduction Signaling games We talked about communication cheap talk veriable talk Talk
More information(a) Output only takes on two values, so the wage will also take on two values: z(0) = 0 0 z(0) 0. max s(d)z { d. n { z 1 0 (n + d) 2.
Steve Pischke/Jin Li Labor Economics II Problem Set Answers. An Agency Problem (a) Output only takes on two values, so the wage will also take on two values: z( ) z 0 z The worker s problem: z(0) 0 0 z(0)
More informationA Theory of Financing Constraints and Firm Dynamics by Clementi and Hopenhayn - Quarterly Journal of Economics (2006)
A Theory of Financing Constraints and Firm Dynamics by Clementi and Hopenhayn - Quarterly Journal of Economics (2006) A Presentation for Corporate Finance 1 Graduate School of Economics December, 2009
More informationOnline Appendix for Dynamic Procurement under Uncertainty: Optimal Design and Implications for Incomplete Contracts
Online Appendix for Dynamic Procurement under Uncertainty: Optimal Design and Implications for Incomplete Contracts By Malin Arve and David Martimort I. Concavity and Implementability Conditions In this
More informationHans Zenger University of Munich. Abstract
The Optimal Regulation of Product Quality under Monopoly Hans Zenger University of Munich Abstract This paper characterizes the optimal quality regulation of a monopolist when quality is observable. In
More informationContinuity in Mechanism Design without Transfers 1
Continuity in Mechanism Design without Transfers 1 David Martimort and Aggey Semenov 3 This Version: March 16, 006 Abstract: We adopt a mechanism design approach to model communication between a principal
More informationAdvanced Economic Theory Lecture 9. Bilateral Asymmetric Information. Double Auction (Chatterjee and Samuelson, 1983).
Leonardo Felli 6 December, 2002 Advanced Economic Theory Lecture 9 Bilateral Asymmetric Information Double Auction (Chatterjee and Samuelson, 1983). Two players, a buyer and a seller: N = {b, s}. The seller
More informationMechanism Design: Bargaining
Mechanism Design: Bargaining Dilip Mookherjee Boston University Ec 703b Lecture 5 (text: FT Ch 7, pp 275-279) DM (BU) Mech Design 703b.5 2019 1 / 13 The Bargaining Problem Two agents: S, seller and B,
More informationBertrand-Edgeworth competition with substantial product dierentiation
Bertrand-Edgeworth competition with substantial product dierentiation Robert Somogyi Preliminary version August 21, 2013 Abstract Since Kreps and Scheinkman's seminal article (1983) a large number of papers
More informationLEN model. And, the agent is risk averse with utility function for wealth w and personal cost of input c (a), a {a L,a H }
LEN model The LEN model is a performance evaluation frame for dealing with unbounded performance measures. In particular, LEN stands for Linear compensation, negative Exponential utility, and Normally
More informationMechanism Design: Dominant Strategies
May 20, 2014 Some Motivation Previously we considered the problem of matching workers with firms We considered some different institutions for tackling the incentive problem arising from asymmetric information
More informationExclusive contracts and market dominance
Exclusive contracts and market dominance Giacomo Calzolari and Vincenzo Denicolò Online Appendix. Proofs for the baseline model This Section provides the proofs of Propositions and 2. Proof of Proposition.
More informationContract Theory - Intro. Roman Inderst
1 Contract Theory - Intro Roman Inderst 2017 2 Overview Focus is contract theory. We explore a principal - agent setting, with core applications to firm - consumer, firm - worker and lender - borrower.
More informationModule 8: Multi-Agent Models of Moral Hazard
Module 8: Multi-Agent Models of Moral Hazard Information Economics (Ec 515) George Georgiadis Types of models: 1. No relation among agents. an many agents make contracting easier? 2. Agents shocks are
More informationDuality Approach to Nonlinear Pricing Schedules with Applications
Duality Approach to Nonlinear Pricing Schedules with Applications Masahiro Watabe Department of Economics Meisei University August 6, 203 Preliminary Draft Abstract The paper provides a reverse of the
More informationThe Signaling Role of Accounting Conservatism in Debt Contracting
The Signaling Role of Accounting Conservatism in Debt Contracting Ying-Ju Chen Mingcherng Deng y October 13, 2009 Abstract Empirical studies have documented that rms that report more conservatively are
More informationAre Two a Good Representative for Many?
Are Two a Good Representative for Many? RUDOLF KERSCHBAMER and NINA MADERNER Abstract This paper studies a discrete formulation of the screening model with typedependent reservation utilities. It closes
More informationMonotone comparative statics Finite Data and GARP
Monotone comparative statics Finite Data and GARP Econ 2100 Fall 2017 Lecture 7, September 19 Problem Set 3 is due in Kelly s mailbox by 5pm today Outline 1 Comparative Statics Without Calculus 2 Supermodularity
More informationMechanism Design with Financially Constrained Agents and Costly Verication
Mechanism Design with Financially Constrained Agents and Costly Verication Yunan Li City University of Hong Kong IMS at NUS July 9, 2018 Motivation ˆ Governments distribute valuable resources to nancially
More informationDynamic Mechanism Design:
Dynamic Mechanism Design: Revenue Equivalence, Pro t Maximization, and Information Disclosure Alessandro Pavan, Ilya Segal, Juuso Toikka May 2008 Motivation Mechanism Design: auctions, taxation, etc...
More informationThis is designed for one 75-minute lecture using Games and Information. October 3, 2006
This is designed for one 75-minute lecture using Games and Information. October 3, 2006 1 7 Moral Hazard: Hidden Actions PRINCIPAL-AGENT MODELS The principal (or uninformed player) is the player who has
More informationRedistribution and Disability Insurance. Hugo A. Hopenhayn UCLA Juan Carlos Hatchondo University of Rochester
Redistribution and Disability Insurance Hugo A. Hopenhayn UCLA Juan Carlos Hatchondo University of Rochester December 6, 2004 1 Introduction Design of welfare programs Several types of insurance Insurance
More informationOnline Appendix: The Continuous-type Model of Competitive Nonlinear Taxation and Constitutional Choice by Massimo Morelli, Huanxing Yang, and Lixin Ye
Online Appendix: The Continuous-type Model o Competitive Nonlinear Taxation and Constitutional Choice by Massimo Morelli, Huanxing Yang, and Lixin Ye For robustness check, in this section we extend our
More informationNonlinear Pricing with Network Externalities and Countervailing Incentives
Nonlinear Pricing with Network Externalities and Countervailing Incentives Dawen Meng International Business School Shanghai Institute of Foreign Trade Shanghai, China. 201600 Guoqiang Tian Department
More informationSome Notes on Costless Signaling Games
Some Notes on Costless Signaling Games John Morgan University of California at Berkeley Preliminaries Our running example is that of a decision maker (DM) consulting a knowledgeable expert for advice about
More informationMENU AUCTIONS AND INFLUENCE GAMES WITH PRIVATE INFORMATION
Working paper MENU AUCTIONS AND INFLUENCE GAMES WITH PRIVATE INFORMATION DAVID MARTIMORT a AND LARS STOLE b June 2015 We study games in which multiple principals influence the choice of a privately-informed
More informationDefinitions and Proofs
Giving Advice vs. Making Decisions: Transparency, Information, and Delegation Online Appendix A Definitions and Proofs A. The Informational Environment The set of states of nature is denoted by = [, ],
More informationDelegation of Regulation
Delegation of Regulation apas Kundu ore Nilssen July 4, 017 Abstract We develop a model to discuss a government s incentives to delegate to bureaucrats the regulation of an industry. he industry consists
More informationControlling versus enabling Online appendix
Controlling versus enabling Online appendix Andrei Hagiu and Julian Wright September, 017 Section 1 shows the sense in which Proposition 1 and in Section 4 of the main paper hold in a much more general
More informationEconS Microeconomic Theory II Homework #9 - Answer key
EconS 503 - Microeconomic Theory II Homework #9 - Answer key 1. WEAs with market power. Consider an exchange economy with two consumers, A and B, whose utility functions are u A (x A 1 ; x A 2 ) = x A
More informationx ax 1 2 bx2 a bx =0 x = a b. Hence, a consumer s willingness-to-pay as a function of liters on sale, 1 2 a 2 2b, if l> a. (1)
Answers to Exam Economics 201b First Half 1. (a) Observe, first, that no consumer ever wishes to consume more than 3/2 liters (i.e., 1.5 liters). To see this, observe that, even if the beverage were free,
More informationFull Surplus Extraction and Costless Information Revelation in Dynamic Environments. Shunya NODA (University of Tokyo)
Full Surplus Extraction and Costless Information Revelation in Dynamic Environments Shunya NODA (University of Tokyo) Outline 1. Introduction. Two-Period Example 3. Three-Period Example 4. Model 5. Main
More informationCompetition relative to Incentive Functions in Common Agency
Competition relative to Incentive Functions in Common Agency Seungjin Han May 20, 2011 Abstract In common agency problems, competing principals often incentivize a privately-informed agent s action choice
More informationCollusion, Delegation and Supervision with Soft Information
Collusion, Delegation and Supervision with Soft Information Antoine Faure-Grimaud Jean-Jacques Laffont and David Martimort Revised: February 4, 2003 Abstract This paper shows that supervision with soft
More information