A general principal-agent setting with non-differentiable mechanisms: Some examples
A procedure for dealing with monotonicity constraints in optimal control problems is used, within the context of a general model on incentive provision with hidden characteristics, to extend the space of contracts considered in principal-agent theory and thus generalize its results. We conclude that most findings, obtained under assumptions of continuity and piecewise differentiability with respect to the decision variable of the problem, remain valid after replacing such assumptions with two minimal requirements. Examples on monopoly with product quality, countervailing incentives and optimal taxation are also provided to illustrate various sources of non-smoothness in the model, and confirm the adequacy of our methods for deriving the sort of characterization that prevails under the standard conditions of continuity and piecewise differentiability.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Laffont, Jean-Jacques, 2001.
"Incentives and Political Economy,"
Oxford University Press, number 9780199248681, December.
- Noldeke,G. & Samuelson,L., 2005.
"Optimal bunching without optimal control,"
13, Wisconsin Madison - Social Systems.
- Georg Nöldeke & Larry Samuelson, 2006. "Optimal Bunching without Optimal Control," Working papers 2006/12, Faculty of Business and Economics - University of Basel.
- Georg Noldeke & Larry Samuelson, 2006. "Optimal Bunching without Optimal Control," Levine's Bibliography 784828000000000502, UCLA Department of Economics.
- Jullien, Bruno, 2000.
"Participation Constraints in Adverse Selection Models,"
Journal of Economic Theory,
Elsevier, vol. 93(1), pages 1-47, July.
- Jullien, Bruno, 1997. "Participation Constraints in Adverse Selection Models," IDEI Working Papers 67, Institut d'Économie Industrielle (IDEI), Toulouse.
- Jean-Charles Rochet & Philippe Chone, 1998. "Ironing, Sweeping, and Multidimensional Screening," Econometrica, Econometric Society, vol. 66(4), pages 783-826, July.
- Mirrlees, J. A., 1976.
"Optimal tax theory : A synthesis,"
Journal of Public Economics,
Elsevier, vol. 6(4), pages 327-358, November.
- Paul Milgrom & Ilya Segal, 2002. "Envelope Theorems for Arbitrary Choice Sets," Econometrica, Econometric Society, vol. 70(2), pages 583-601, March.
- Guesnerie, Roger & Laffont, Jean-Jacques, 1984. "A complete solution to a class of principal-agent problems with an application to the control of a self-managed firm," Journal of Public Economics, Elsevier, vol. 25(3), pages 329-369, December.
- X. RUIZ del PORTAL, 2007. "The Problem of Optimum Income Taxation: A Remark on Its Monotonicity Constraint," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 9(2), pages 265-283, 04.
- Maggi G. & Rodriguez-Clare A., 1995. "On Countervailing Incentives," Journal of Economic Theory, Elsevier, vol. 66(1), pages 238-263, June.
- Spence, Michael, 1977. "Nonlinear prices and welfare," Journal of Public Economics, Elsevier, vol. 8(1), pages 1-18, August.
- J. A. Mirrlees, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Oxford University Press, vol. 38(2), pages 175-208.
- Lewis, Tracy R. & Sappington, David E. M., 1989. "Countervailing incentives in agency problems," Journal of Economic Theory, Elsevier, vol. 49(2), pages 294-313, December.
- Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
When requesting a correction, please mention this item's handle: RePEc:eee:matsoc:v:57:y:2009:i:2:p:262-278. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)
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.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.