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Screening Experts' Distributional Preferences

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  • Dominik Erharter

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    Abstract

    We study optimal direct mechanisms for a credence goods expert who can be altruistic or spiteful. The expert has private information about her distributional preferences and possibly also about her customer's needs. We introduce a method that allows the customer to offer separate contracts to different preference types and outline when separation is optimal. Furthermore, we demonstrate that the optimality of separating mechanisms is sensitive to minor changes of the customer's utility function. Additionally, we illustrate how our results extend to more than two preference types and discuss possible policy implications.

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    File URL: http://eeecon.uibk.ac.at/wopec2/repec/inn/wpaper/2013-27.pdf
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    Bibliographic Info

    Paper provided by Faculty of Economics and Statistics, University of Innsbruck in its series Working Papers with number 2013-27.

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    Length: 34 pages
    Date of creation: Oct 2013
    Date of revision:
    Handle: RePEc:inn:wpaper:2013-27

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    Web page: http://www.uibk.ac.at/fakultaeten/volkswirtschaft_und_statistik/index.html.en
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    Keywords: other-regarding preferences; inequality aversion; credence good; principal-agent model; adverse selection; moral hazard;

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    15. Desiraju, Ramarao & Sappington, David E.M., 2007. "Equity and adverse selection with correlated costs," Economics Letters, Elsevier, vol. 95(3), pages 402-407, June.
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    22. López-Pérez, Raúl, 2008. "Aversion to norm-breaking: A model," Games and Economic Behavior, Elsevier, vol. 64(1), pages 237-267, September.
    23. Uwe Dulleck & Rudolf Kerschbamer & Matthias Sutter, 2011. "The Economics of Credence Goods: An Experiment on the Role of Liability, Verifiability, Reputation, and Competition," American Economic Review, American Economic Association, vol. 101(2), pages 526-55, April.
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