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Transferable deposits as a screening mechanism

Author

Listed:
  • David Lagziel

    (Ben-Gurion University of the Negev)

  • Ehud Lehrer

    (Tel Aviv University
    INSEAD)

Abstract

We design incentive schemes for portfolio managers that screen low-skill managers: only the best portfolio managers, in terms of expected payoffs, agree to participate in a single-period investment. The results hold in general financial markets, where uninformed investors face managers of different capabilities, and can only observe their one-stage realized returns.

Suggested Citation

  • David Lagziel & Ehud Lehrer, 2021. "Transferable deposits as a screening mechanism," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 71(2), pages 483-504, March.
    • Handle: RePEc:spr:joecth:v:71:y:2021:i:2:d:10.1007_s00199-020-01264-2
    DOI: 10.1007/s00199-020-01264-2
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    More about this item

    Keywords

    Screening problem; Reward schemes; Investment game;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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