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Optimal delegated search with adverse selection and moral hazard

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  • Ulbricht, Robert

    (Toulouse School of Economics)

Abstract

The paper studies a model of delegated search. The distribution of search revenues is unknown to the principal and has to be elicited from the agent in order to design the optimal search policy. At the same time, the search process is unobservable, requiring search to be self-enforcing. The two information asymmetries are mutually enforcing each other; if one is relaxed, delegated search is efficient. With both asymmetries prevailing simultaneously, search is almost surely inefficient (it is stopped too early). Second-best remuneration is shown to optimally utilize a menu of simple bonus contracts. In contrast to standard adverse selection problems, indirect nonlinear tariffs are strictly dominated.

Suggested Citation

  • Ulbricht, Robert, 2016. "Optimal delegated search with adverse selection and moral hazard," Theoretical Economics, Econometric Society, vol. 11(1), January.
    • Handle: RePEc:the:publsh:1801
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    Cited by:

    1. MohammadTaghi Hajiaghayi & Keivan Rezaei & Suho Shin, 2023. "Delegating to Multiple Agents," Papers 2305.03203, arXiv.org, revised May 2023.
    2. Foucart, Renaud, 2020. "Metasearch and market concentration," International Journal of Industrial Organization, Elsevier, vol. 70(C).
    3. Xi Chen & Yu Chen & Xuhu Wan, 2018. "Delegated Project Search," Graz Economics Papers 2018-11, University of Graz, Department of Economics.
    4. Florian Englmaier & Stefan Grimm & Dominik Grothe & David Schindler & Simeon Schudy, 2024. "The Effect of Incentives in Nonroutine Analytical Team Tasks," Journal of Political Economy, University of Chicago Press, vol. 132(8), pages 2695-2747.
    5. Mauring, Eeva, 2016. "A two-agent model of sequential search and choice," Journal of Economic Behavior & Organization, Elsevier, vol. 123(C), pages 122-137.
    6. Th'eo Durandard & Udayan Vaidya & Boli Xu, 2025. "Robust Contracting for Sequential Search," Papers 2504.17948, arXiv.org.
    7. Elnaz Bajoori & Julia Wirtz, 2022. "Optimal delegated search with learning and nomonetary transfers," Bristol Economics Discussion Papers 22/768, School of Economics, University of Bristol, UK.

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    More about this item

    Keywords

    Adverse selection; bonus contracts; delegated search; moral hazard; optimal stopping;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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