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Role of Linking Mechanisms in Multitask Agency with Hidden Information

  • Hitoshi Matsushima

    (Faculty of Economics, University of Tokyo)

  • Koichi Miyazaki

    (Department of Economics, Pennsylvania State University)

  • Nobuyuki Yagi

    (Graduate School of Economics, University of Tokyo)

We investigate the adverse selection problem where a principal delegates multiple tasks to an agent. We characterize the virtually implementable social choice functions by using the linking mechanism proposed by Jackson and Sonnenschein (2007) that restricts the message spaces. The principal does not require any incentive wage schemes and can therefore avoid any information rent and welfare loss. We show the resemblance between the functioning of this message space restriction and that of incentive wage schemes. We also extend the results of the single-agent model to the multi-agent model.

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Paper provided by Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo in its series CARF F-Series with number CARF-F-209.

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Length: 28 pages
Date of creation: Mar 2010
Date of revision:
Handle: RePEc:cfi:fseres:cf209
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