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Stochastic mechanisms in settings without monetary transfers: The regular case

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  • Kovác, Eugen
  • Mylovanov, Tymofiy

Abstract

We analyze relative performance of stochastic and deterministic mechanisms in an environment that has been extensively studied in the literature on communication (e.g., [Vincent P. Crawford, Joel Sobel, Strategic information transmission, Econometrica 50 (6) (1982) 1431-1451]) and optimal delegation (e.g., [Bengt Holmström, On the theory of delegation, in: M. Boyer, R.E. Kihlstrom (Eds.), Bayesian Models in Economic Theory, North-Holland, 1984, pp. 115-141]): a principal-agent model with hidden information, no monetary transfers, and single-peaked preferences. We demonstrate that under the common assumption of quadratic payoffs and a certain regularity condition on the distribution of private information and the agent's bias, the optimal mechanism is deterministic. We also provide an explicit characterization of this mechanism.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 144 (2009)
Issue (Month): 4 (July)
Pages: 1373-1395

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Handle: RePEc:eee:jetheo:v:144:y:2009:i:4:p:1373-1395

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Web page: http://www.elsevier.com/locate/inca/622869

Related research

Keywords: Optimal delegation Cheap talk Principal-agent relationship No monetary transfers Stochastic mechanisms;

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Cited by:
  1. Pinghan Liang, 2010. "Transfer of Authority within Hierarchy," Levine's Working Paper Archive 661465000000000139, David K. Levine.
  2. Tymofiy Mylovanov & Andriy Zapechelnyuk, 2010. "Decision Rules for Experts with Opposing Interests," Working Papers 674, Queen Mary, University of London, School of Economics and Finance.
  3. Chirantan Ganguly & Indrajit Ray, 2011. "Simple Mediation in a Cheap-Talk Game," Discussion Papers 05-08rr, Department of Economics, University of Birmingham.
  4. Liang, Pinghan, 2013. "Optimal delegation via a strategic intermediary," MPRA Paper 45271, University Library of Munich, Germany.
  5. Alex Gershkov & Benny Moldovanu & Xianwen Shi, 2013. "Optimal Voting Rules," Working Papers tecipa-493, University of Toronto, Department of Economics.
  6. Lai, Ernest K. & Lim, Wooyoung, 2012. "Authority and communication in the laboratory," Games and Economic Behavior, Elsevier, vol. 74(2), pages 541-560.
  7. Frédéric Koessler & David Martimort, 2008. "Multidimensional communication mechanisms: cooperative and conflicting designs," Working Papers halshs-00586854, HAL.
  8. Ivanov, Maxim, 2010. "Informational control and organizational design," Journal of Economic Theory, Elsevier, vol. 145(2), pages 721-751, March.
  9. Armstrong, Mark & Vickers, John, 2008. "A model of delegated project choice," MPRA Paper 8963, University Library of Munich, Germany.
  10. Lim, Wooyoung, 2012. "Selling authority," Journal of Economic Behavior & Organization, Elsevier, vol. 84(1), pages 393-415.
  11. Alex Gershkov & Benny Moldovanu & Xianwen Shi, 2013. "Optimal Mechanism Design without Money," Working Papers tecipa-481, University of Toronto, Department of Economics.
  12. Vincent Anesi & Daniel J. Seidmann, 2009. "Optimal Delegation with a Finite Number of States," Discussion Papers 2009-20, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
  13. Aggey Semenov, 2012. "Delegation to a potentially uninformed agent," Working Papers 1215E, University of Ottawa, Department of Economics.
  14. Kovác, Eugen & Krähmer, Daniel, 2013. "Optimal Sequential Delegation," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 427, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  15. Liang, Pinghan, 2013. "Optimal delegation via a strategic intermediary," Games and Economic Behavior, Elsevier, vol. 82(C), pages 15-30.
  16. Koessler, Frédéric & Martimort, David, 2012. "Optimal delegation with multi-dimensional decisions," Journal of Economic Theory, Elsevier, vol. 147(5), pages 1850-1881.
  17. Kos, Nenad & Messner, Matthias, 2013. "Incentive compatibility in non-quasilinear environments," Economics Letters, Elsevier, vol. 121(1), pages 12-14.

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