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original papers : Implementation of optimal contracts under adverse selection

Author

Listed:
  • Pablo AmorÕs

    () (Departamento TeorÎa e Historia EconÕmica, Universidad de MÂlaga, Campus El Ejido, E-29013, MÂlaga, Spain)

  • Bernardo Moreno

    () (Departamento TeorÎa e Historia EconÕmica, Universidad de MÂlaga, Campus El Ejido, E-29013, MÂlaga, Spain)

Abstract

This paper studies a 2-agent, 2-type principal-multiagent model of adverse selection under the assumption that the agents each have complete information. We construct a mechanism implementing the first-best contracts in Nash equilibrium that: satisfies a condition related to individual rationality, is renegotiation-proof, has a small-sized message space, achieves unique implementation and satisfies undomination of Nash equilibrium strategies. Moreover, we prove that other requirements which relate to individual rationality (different from the one satisfied by our mechanism) are not compatible with implementation of the first-best contracts.

Suggested Citation

  • Pablo AmorÕs & Bernardo Moreno, 2001. "original papers : Implementation of optimal contracts under adverse selection," Review of Economic Design, Springer;Society for Economic Design, vol. 6(1), pages 41-61.
  • Handle: RePEc:spr:reecde:v:6:y:2001:i:1:p:41-61
    Note: Received: 27 July 1998 / Accepted: 26 May 2000
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    Citations

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    Cited by:

    1. Matthew O. Jackson, 2001. "A crash course in implementation theory," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 18(4), pages 655-708.
    2. Amoros, Pablo, 2004. "Nash implementation and uncertain renegotiation," Games and Economic Behavior, Elsevier, vol. 49(2), pages 424-434, November.

    More about this item

    Keywords

    Adverse selection; Contract theory; Implementation theory; Nash equilibrium;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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