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- Implementation Of Optimal Contracts Under Adverse Selection

Author

Listed:
  • Bernarda Zamora

    (Universidad de Alicante)

  • Pablo Amorós

    (Universidad de Alicante)

Abstract

This paper studies the principal-multiagent model of a firm subject to adverse selection. We focus on agents who have complete information. We propose some desirable properties to be satisfied by mechanisms implementing the first-best in Nash equilibrium: (i) enforceability (a property related with the individual rationality of the mechanism), (ii) renegotiation-proofness, (iii) small strategy spaces, (iv) unique implementation, (v) unique best-reply and (vi) no mixed strategies. We prove that enforceability is not compatible with renegotiation-proofness or the unique best-reply property. Then we propose two mechanisms. The first one satisfies properties (i), (ii) and (iv). The second mechanism verifies all properties but enforceability.

Suggested Citation

  • Bernarda Zamora & Pablo Amorós, 1998. "- Implementation Of Optimal Contracts Under Adverse Selection," Working Papers. Serie AD 1998-25, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    • Handle: RePEc:ivi:wpasad:1998-25
    as

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    File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-1998-25.pdf
    File Function: Fisrt version / Primera version, 1998
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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