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Renegotiation proof mechanism design with imperfect type verification

Author

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  • Silva, Francisco

    (Department of Economics, Pontificia Universidad Catolica de Chile)

Abstract

I consider the interaction between an agent and a principal who is unable to commit not to renegotiate. The agent's type only affects the principal's utility. The principal has access to a public signal, correlated with the agent's type, which can be used to (imperfectly) verify the agent's report. I define renegotiation proof mechanisms and characterize the optimal one. The main finding of this paper is that the optimal renegotiation proof mechanism induces pooling at the top, i.e., types above a certain threshold report to be the largest type, while types below the threshold report truthfully.

Suggested Citation

  • Silva, Francisco, 2019. "Renegotiation proof mechanism design with imperfect type verification," Theoretical Economics, Econometric Society, vol. 14(3), July.
    • Handle: RePEc:the:publsh:3190
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    References listed on IDEAS

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    Cited by:

    1. Pereyra, Juan Sebastián & Silva, Francisco, 2023. "Optimal assignment mechanisms with imperfect verification," Theoretical Economics, Econometric Society, vol. 18(2), May.
    2. Francisco Silva & Juan Pereyra, 2020. "Optimal object assignment mechanisms with imperfect type veri?cation," Documentos de Trabajo 540, Instituto de Economia. Pontificia Universidad Católica de Chile..

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    More about this item

    Keywords

    Renegotiation proof; mechanism design; verification;
    All these keywords.

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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