Mechanism Design with Two Types of Information
In many real-world situations, a principal faces an agent who has two different types of information: one associated with contractible actions and the other not. The main results show that a direct mechanism, by characterizing incentives of a supervisor, 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 supervisor. This result has new implications for the theory of the firm, as opposed to what the standard mechanism theory offers.
|Date of creation:||2016|
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