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Role of linking mechanisms in multitask agency with hidden information

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  • Matsushima, Hitoshi
  • Miyazaki, Koichi
  • Yagi, Nobuyuki

Abstract

We investigate the adverse selection problem where a principal delegates multiple tasks to an agent. We characterize the virtually implementable social choice functions by using the linking mechanism proposed by Jackson and Sonnenschein (2007) [20] that restricts the message spaces. The principal does not require any incentive wage schemes and can therefore avoid any information rent and welfare loss. We show the resemblance between the functioning of this message space restriction and that of incentive wage schemes. We also extend the results of the single-agent model to the multi-agent model.

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Bibliographic Info

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

Volume (Year): 145 (2010)
Issue (Month): 6 (November)
Pages: 2241-2259

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Handle: RePEc:eee:jetheo:v:145:y:2010:i:6:p:2241-2259

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

Related research

Keywords: Multitask agency Hidden information No side payments Linking mechanisms Characterization Full surplus extraction;

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References

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  1. Eliaz, Kfir & Ray, Debraj & Razin, Ronny, 2004. "Group Decision-Making in the Shadow of Disagreement," CEPR Discussion Papers 4480, C.E.P.R. Discussion Papers.
  2. Matsushima, Hitoshi, 2007. "Mechanism design with side payments: Individual rationality and iterative dominance," Journal of Economic Theory, Elsevier, vol. 133(1), pages 1-30, March.
  3. Dirk Engelmann & Veronika Grimm, 2012. "Mechanisms for Efficient Voting with Private Information about Preferences," Economic Journal, Royal Economic Society, vol. 122(563), pages 1010-1041, 09.
  4. Hanming Fang & Peter Norman, 2003. "An Efficiency Rationale for Bundling of Public Goods," Cowles Foundation Discussion Papers 1441, Cowles Foundation for Research in Economics, Yale University.
  5. Casella, Alessandra & Palfrey, Thomas R. & Riezman, Raymond, 2006. "Minorities and storable votes," Working Papers 1261, California Institute of Technology, Division of the Humanities and Social Sciences.
  6. Casella, Alessandra & Gelman, Andrew & Palfrey, Thomas R., 2006. "An experimental study of storable votes," Games and Economic Behavior, Elsevier, vol. 57(1), pages 123-154, October.
  7. Georg Kirchsteiger & Ernst Fehr & Simon Gächter, 1997. "Reciprocity as a contract enforcement device: experimental evidence," ULB Institutional Repository 2013/5911, ULB -- Universite Libre de Bruxelles.
  8. Cremer, Jacques & McLean, Richard P, 1985. "Optimal Selling Strategies under Uncertainty for a Discriminating Monopolist When Demands Are Interdependent," Econometrica, Econometric Society, vol. 53(2), pages 345-61, March.
  9. Ernst Fehr & Armin Falk, 2002. "Psychological Foundations of Incentives," CESifo Working Paper Series 714, CESifo Group Munich.
  10. B. Douglas Bernheim & Michael D. Whinston, 1990. "Multimarket Contact and Collusive Behavior," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 1-26, Spring.
  11. Roger B. Myerson, 1977. "Incentive Compatability and the Bargaining Problem," Discussion Papers 284, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  12. Cremer, Jacques & McLean, Richard P, 1988. "Full Extraction of the Surplus in Bayesian and Dominant Strategy Auctions," Econometrica, Econometric Society, vol. 56(6), pages 1247-57, November.
  13. Armstrong, M., 1996. "Price discrimination by a many-product firm," Discussion Paper Series In Economics And Econometrics 9628, Economics Division, School of Social Sciences, University of Southampton.
  14. Hitoshi Matsushima, 1998. "Multimarket Contact, Imperfect Monitoring, and Implicit Collusion," CIRJE F-Series CIRJE-F-24, CIRJE, Faculty of Economics, University of Tokyo.
  15. Chung, Kim-Sau, 1999. "A Note on Matsushima's Regularity Condition," Journal of Economic Theory, Elsevier, vol. 87(2), pages 429-433, August.
  16. Aoyagi, Masaki, 1998. "Correlated Types and Bayesian Incentive Compatible Mechanisms with Budget Balance," Journal of Economic Theory, Elsevier, vol. 79(1), pages 142-151, March.
  17. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, December.
  18. Matsushima, Hitoshi, 1991. "Incentive compatible mechanisms with full transferability," Journal of Economic Theory, Elsevier, vol. 54(1), pages 198-203, June.
  19. Hanming Fang & Peter Norman, 2005. "Overcoming Participation Constraints," Cowles Foundation Discussion Papers 1511, Cowles Foundation for Research in Economics, Yale University.
  20. d'Aspremont, Claude & Gerard-Varet, Louis-Andre, 1979. "Incentives and incomplete information," Journal of Public Economics, Elsevier, vol. 11(1), pages 25-45, February.
  21. Casella, Alessandra, 2002. "Storable Votes," CEPR Discussion Papers 3508, C.E.P.R. Discussion Papers.
  22. Johnson, Scott & Pratt, John W & Zeckhauser, Richard J, 1990. "Efficiency Despite Mutually Payoff-Relevant Private Information: The Finite Case," Econometrica, Econometric Society, vol. 58(4), pages 873-900, July.
  23. Matthew O Jackson & Hugo F Sonnenschein, 2007. "Overcoming Incentive Constraints by Linking Decisions -super-1," Econometrica, Econometric Society, vol. 75(1), pages 241-257, 01.
  24. Dirk Engelmann & Veronika Grimm, 2006. "Overcoming Incentive Constraints? The (In-)effectiveness of Social Interaction," Working Paper Series in Economics 22, University of Cologne, Department of Economics.
  25. Itoh Hideshi, 1993. "Coalitions, Incentives, and Risk Sharing," Journal of Economic Theory, Elsevier, vol. 60(2), pages 410-427, August.
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Citations

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Cited by:
  1. Hitoshi Matsushima, 2010. "Role of Relative and Absolute Performance Evaluations in Intergroup Competition," CARF F-Series CARF-F-213, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
  2. David A. Miller & Kareen Rozen, 2011. "Optimally Empty Promises and Endogenous Supervision," Levine's Working Paper Archive 786969000000000270, David K. Levine.
  3. Hitoshi Matsushiima, 2006. "Relative Performance Evaluation between Multitask Agents," CARF F-Series CARF-F-067, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.

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