Imperfect Commitment and the Revelation Principle
AbstractThis paper extends the revelation principle to environments in which the mechanism designer cannot fully commit to the outcome induced by the mechanism. We show that he may optimally use a direct mechanism under which truthful revelation is an optimal strategy for the agent. In contrast with the conventional revelation principle, however, the agent may not use this strategy with probability one. Our results provide a basic tool for studying dynamic contracting problems between a principal and a single agent. Also, we indicate that the revelation principle cannot be extended to a framework with multiple agents and limited commitment.
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Find related papers by JEL classification:
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
This paper has been announced in the following NEP Reports:
- NEP-ALL-2001-01-21 (All new papers)
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