IDEAS home Printed from https://ideas.repec.org/a/eee/gamebe/v152y2025icp150-174.html
   My bibliography  Save this article

Grouping agents with persistent types

Author

Listed:
  • Malcomson, James M.

Abstract

Employees are divided into grades. Toyota places suppliers into only a small number of categories. This paper shows that grouping of privately informed and persistent agent types arises naturally in relational incentive contracts when agent type is continuous. Malcomson (2016) showed that full separation is not possible if, following full revelation of an agent's type, payoffs for principal and agent are on the Pareto frontier. This paper shows how much separation can be achieved. Specifically, it characterizes the finest partitioning that can be achieved in each period with agent types for which first-best effort is unattainable. Separation may take time, with initial coarser partitions being subsequently refined, but does not continue indefinitely. When it stops, there remain a finite number of groups of agent types. Numerical illustrations for constant elasticity cost of effort show the maximum number is typically small despite agent type being continuous.

Suggested Citation

  • Malcomson, James M., 2025. "Grouping agents with persistent types," Games and Economic Behavior, Elsevier, vol. 152(C), pages 150-174.
    • Handle: RePEc:eee:gamebe:v:152:y:2025:i:c:p:150-174
    DOI: 10.1016/j.geb.2025.03.008
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0899825625000430
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.geb.2025.03.008?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Relational incentive contracts; Persistent private information; Renegotiation-proofness; Type pooling;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:gamebe:v:152:y:2025:i:c:p:150-174. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/622836 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.