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Mechanism Design with Non-Contractible Information

Listed author(s):
  • Seung Han Yoo

    ()

    (Department of Economics, Korea University, Seoul, Republic of Korea)

A principal faces an agent with non-contractible information. The principal considers mechanisms with an informed manager. The main results show that a direct mechanism, by characterizing incentives of the manager, weakly dominates the optimal "selling the project" contract. The nature of incompleteness suggests a foundation of incomplete contract, the agent's information structure, and thus demands a different solution, an informational hierarchical structure with the manager. This result has new implications for the theory of the firm, as opposed to what the standard mechanism theory offers.

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File URL: http://econ.korea.ac.kr/~ri/WorkingPapers/w1604.pdf
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Paper provided by Institute of Economic Research, Korea University in its series Discussion Paper Series with number 1604.

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Date of creation: 2016
Handle: RePEc:iek:wpaper:1604
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  1. Eric Maskin & John Riley, 2000. "Asymmetric Auctions," Review of Economic Studies, Oxford University Press, vol. 67(3), pages 413-438.
  2. Krishna, Vijay, 2009. "Auction Theory," Elsevier Monographs, Elsevier, edition 2, number 9780123745071.
  3. Eric Maskin & Jean Tirole, 1999. "Unforeseen Contingencies and Incomplete Contracts," Review of Economic Studies, Oxford University Press, vol. 66(1), pages 83-114.
  4. Myerson, Roger B., 1982. "Optimal coordination mechanisms in generalized principal-agent problems," Journal of Mathematical Economics, Elsevier, vol. 10(1), pages 67-81, June.
  5. Edward Clarke, 1971. "Multipart pricing of public goods," Public Choice, Springer, vol. 11(1), pages 17-33, September.
  6. Jean Tirole, 1999. "Incomplete Contracts: Where Do We Stand?," Econometrica, Econometric Society, vol. 67(4), pages 741-782, July.
  7. Dilip Mookherjee & Masatoshi Tsumagari, 2014. "Mechanism Design with Communication Constraints," Journal of Political Economy, University of Chicago Press, vol. 122(5), pages 1094-1129.
  8. William Vickrey, 1961. "Counterspeculation, Auctions, And Competitive Sealed Tenders," Journal of Finance, American Finance Association, vol. 16(1), pages 8-37, 03.
  9. Tirole, Jean, 1986. "Hierarchies and Bureaucracies: On the Role of Collusion in Organizations," Journal of Law, Economics and Organization, Oxford University Press, vol. 2(2), pages 181-214, Fall.
  10. Cremer, Jacques & McLean, Richard P, 1988. "Full Extraction of the Surplus in Bayesian and Dominant Strategy Auctions," Econometrica, Econometric Society, vol. 56(6), pages 1247-1257, November.
  11. Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, Oxford University Press, vol. 87(3), pages 355-374.
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