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Costless Coordination through Public Contracting

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  • Yuan, Yating

    (University of Warwick)

Abstract

A principal incentivizes a team of agents to work on a joint project. Building on Winter (2004), this paper explores a simple mechanism where agents choose between two public messages, collaborate and ‘monopolize’, and the message profile decides their bonus upon team success. The principal minimizes the total payment while ensuring full effort in outcomes that survive Iterative Elimination of Weakly Dominated Strategies. The optimal mechanism reaches the first-best payment, leaving no rent for strategic uncertainty. Unlike previous results (Winter, 2004; Halac et al., 2021; Cavounidis and Ghosh, 2021), the optimal bonus allocation is neither discriminatory nor private. Thus, effciency need not come at the cost of fairness or transparency.

Suggested Citation

  • Yuan, Yating, 2025. "Costless Coordination through Public Contracting," The Warwick Economics Research Paper Series (TWERPS) 1561, University of Warwick, Department of Economics.
    • Handle: RePEc:wrk:warwec:1561
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    File URL: https://warwick.ac.uk/fac/soc/economics/research/workingpapers/2025/twerp_1561-_yuan.pdf
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    References listed on IDEAS

    as
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