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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. Roger B. Myerson, 1977. "Incentive Compatability and the Bargaining Problem," Discussion Papers 284, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. Ernst Fehr, 2003. "Psychological Foundations of Incentives," Microeconomics 0305010, EconWPA.
  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. Casella, Alessandra & Gelman, Andrew & Palfrey, Thomas R, 2003. "An Experimental Study of Storable Votes," CEPR Discussion Papers 4081, C.E.P.R. Discussion Papers.
  5. Hanming Fang & Peter Norman, 2005. "Overcoming Participation Constraints," Cowles Foundation Discussion Papers 1511R, Cowles Foundation for Research in Economics, Yale University, revised Apr 2006.
  6. 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.
  7. 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.
  8. 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.
  9. 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.
  10. Armstrong, Mark, 1999. "Price Discrimination by a Many-Product Firm," Review of Economic Studies, Wiley Blackwell, vol. 66(1), pages 151-68, January.
  11. 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.
  12. Matsushima, Hitoshi, 2001. "Multimarket Contact, Imperfect Monitoring, and Implicit Collusion," Journal of Economic Theory, Elsevier, vol. 98(1), pages 158-178, May.
  13. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, December.
  14. 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.
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  16. Eliaz, Kfir & Ray, Debraj & Razin, Ronny, 2007. "Group decision-making in the shadow of disagreement," Journal of Economic Theory, Elsevier, vol. 132(1), pages 236-273, January.
  17. d'Aspremont, Claude & Gerard-Varet, Louis-Andre, 1979. "Incentives and incomplete information," Journal of Public Economics, Elsevier, vol. 11(1), pages 25-45, February.
  18. 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.
  19. 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.
  20. Itoh Hideshi, 1993. "Coalitions, Incentives, and Risk Sharing," Journal of Economic Theory, Elsevier, vol. 60(2), pages 410-427, August.
  21. 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.
  22. Chung, Kim-Sau, 1999. "A Note on Matsushima's Regularity Condition," Journal of Economic Theory, Elsevier, vol. 87(2), pages 429-433, August.
  23. 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.
  24. 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.
  25. Matsushima, Hitoshi, 1991. "Incentive compatible mechanisms with full transferability," Journal of Economic Theory, Elsevier, vol. 54(1), pages 198-203, June.
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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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