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Tuesday, August 4, 2020 | History

2 edition of Efficient contracts and incentive compatibility with asymmetric information. found in the catalog.

Efficient contracts and incentive compatibility with asymmetric information.

James Pemberton

Efficient contracts and incentive compatibility with asymmetric information.

by James Pemberton

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  • 8 Currently reading

Published by University of Reading.Department of Economics in Reading .
Written in English


Edition Notes

SeriesDiscussion papers in economics. Series A / University of Reading -- No.208
ID Numbers
Open LibraryOL13876110M

  Sappington, D. (), “Incentive Contracting with Asymmetric and Precontractual Knowledge,” Journal of Economic Theory, Contract Theory, Fall   which it has an incentive to misrepresent. There is a nontrivial enforcement problem. The solution proposed by Grossman and Hart was to distort the contract away from the first-best to remove the incentive for the firm to lie. The asymmetric information models of

  Using the Book ix The Level of Mathematics x Other Books xi Acknowledgements xiii Introduction 1 Categories of Asymmetric Information Models The Production Game Contents vii Finding Optimal Contracts: The Three-Step Procedure and the Incentive Compatibility and Participation Constraints Optimal Contracts: The   Macleod and Malcomson (), \Implicit Contracts, Incentive Compatibility, and Involuntary Unemployment," Econometrica. Macleod and Malcomson (), \Motivation and Markets," American Economic Review. Levin (), \Relational Incentive Contracts," American (), \Income Fluctuation and Asymmetric Information: An Example of a Repeated

Chapters 5, 6, and 7 then deal with the general theories of incentive compatibility, Bayesian mechanism design, and dominant strategy mechanism design. The first seven chapters of the book focus on the quasi-linear environments studied in most economic applications, with more general environments ('non-transferable utility') postponed to chapter :// COVID Resources. Reliable information about the coronavirus (COVID) is available from the World Health Organization (current situation, international travel).Numerous and frequently-updated resource results are available from this ’s WebJunction has pulled together information and resources to assist library staff as they consider how to handle coronavirus


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Efficient contracts and incentive compatibility with asymmetric information by James Pemberton Download PDF EPUB FB2

An Incentive Contract With Asymmetric Information Article (PDF Available) in International Economic Journal 14(1) February with Reads How we measure 'reads' Exchange economies with asymmetric information: competitive equilibrium and core.

Stefan Maus. Pages Core, Pareto Optimality and Incentive Compatibility. Incentive compatibility and information superiority of the core of an economy with differential information One of the main problems in current economic theory is to write As shown in Myerson () and Holmström and Myerson (), an efficient allocation may not be incentive compatible in the Bayesian framework.

1 However, when agents have the Wald’s maxmin preferences, de Castro and Yannelis () showed that the conflict between efficiency and incentive compatibility no longer exists: all efficient   an incentive to reveal the true state of nature if a long working time is linked to higher wages.

Ito () extended the model of Grossman and Hart () of optimal labor contracts in asymmetric information about firm’s profitability and proposed a model   The information is asymmetric after the signing of the employment contract and before production occurs, so the incentive compatibility (truth-revealing) constraints remain the same with or without an information advantage upon contracting, i.e., (4) w ̲ − θ ̲ q ̲ ≥ w ¯ − θ ̲ q ¯ for the low-cost employee and (5) w ¯ − θ ¯ q   Optimal repair of degrading computers under asymmetric information and incentive incompatibility Computers & Operations Research, Vol.

25, No. 9 Coordination Between Production and Commercial Planning: Organisational and Modelling Issues Procurement Contracts Under Asymmetric Yield Information.

a nonsymmetric contract is shown to be efficient and incentive compatible. For the case of buyer undertrust, the contract structure is Summary.

The paper extends Diamond’s () analysis of financial contracting with information asymmetry ex post and endogenous “bankruptcy penalties” to allow for risk aversion of the borrower.

The optimality of debt contracts, which Diamond obtained for the case of risk neutrality, is shown to be nonrobust to the introduction of risk aversion.

This contrasts with the costly state Incentive-Compatible Debt Contracts: The One-Period Problem DOUGLAS GALE University of Pennsylvania and London School of Economics MARTIN HELLWIG University of Bonn In a simple model of borrowing and lending with asymmetric information we show that the optimal, incentive-compatible debt contract is the standard debt contract.

The second-best level   Hidden information (or adverse selection): when the involved party has private infor-mation which is not known to others. Contractual incompleteness: when contracts do not deal with all relevant contingen-cies. There are many applications of contract theory, among which the   In our model of asymmetric information the borrower is con- strained in an efficient contract by his past history: if he has borrowed low reduces the cost of inducing incentive compatibility, which is obtained examine the long-run properties of efficient contracts which are one of our main concerns here.

THE MODEL Chapter Asymmetric Information. This would be an exchange that lowers total surplus and the market cannot therefore be efficient. Asymmetric Information describes a situation when one side of an exchange, the buyer or the seller, knows more about the product than the other. Generally, we might expect the sellers of goods to know more ion/intermediatemicroeconomics/chapter/module 6.

George J. Mailath and Andrew Postlewaite (), ‘Asymmetric Information Bargaining Problems with Many Agents’, Review of Economic Studies, 57 (3), July, –67 B. Incentive Compatibility and the Revelation Principle 7. Allan Gibbard (), ‘Manipulation of Voting Schemes: A General Result’, Econometrica, 41 (4), July, – ://   asymmetric information and state the main result of the paper.

In Theorem 1 we identify the exact conditions under which general incentive problems are characterized by the existence of countervailing incentives. We also state a general and very simple method to obtain the optimal contract under asymmetric Downloadable (with restrictions).

A fundamental result of modern economics is the conflict between efficiency and incentive compatibility, that is, the fact that some Pareto optimal (efficient) allocations are not incentive compatible.

This conflict has generated a huge literature, which almost always assumes that individuals are expected utility ://   Agent 2 has an incentive to report b when he observes {a,c} This example demonstrates that “full or ex post Pareto optimality” is not necessarily compatible with incentive compatibility.

The following example will illustrate the role of the private information measurability of an allocation. Example There are two Agents, 1 and 2, Downloadable. The paper extends Diamond’s () analysis of financial contracting with information asymmetry ex post and endogenous ”bankruptcy penalties” to allow for risk aversion of the borrower.

The optimality of debt contracts, which Diamond obtained for the case of risk neutrality, is shown to be nonrobust to the introduction of risk ://   Contract theory is the study of how individuals and businesses construct and develop legal agreements, drawing on economic behavior and social science to understand :// We study economies of asymmetric information with observable types.

while the incentive compatibility constraints are imposed on the production set of the intermediaries. This formalization encompasses moral hazard, as in Jerez (, ), and private information economies. Equilibrium allocations are constrained efficient, but, contrary This paper explores the role of the asymmetry in information in business to business (B2B) transactions.

In a vertical setting with successive monopolies we present the equivalence that holds under complete information, that is, the profitability of the powerful party does not depend on its position in the industry and we investigate how potential information advantages affect this ://.

Randomization with asymmetric information Richard Arnott* and Joseph E. Stiglitz* * level of expected utility and subject also to the relevant incentive-compatibility constraints. This allows us to characterize Pareto-efficient contracts. In the adverse-selection section,According to the problem of lacking incentive in the power enterprise's performance management system, a performance incentive mode design is put forward, based on incentive compatibility principle.

First, the individual rationality condition and incentive compatibility condition are founded; then, according to the different information disclosure situation in stated-owned enterprises With asymmetric information, in the long-term cooperation of the supply chain, the brand may inhibit the dealer from disclosing her quality (type) to reduce information rent, which may also lead to system allocative inefficiencies.

So, the brand needs to trade-off between information rent and efficient allocation. The Separated Contract