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We consider how one party can induce another party to join an international emission compact given private information. Due to multilateral externalities the principal uses her own emissions besides subsidies to incentivize the agent. This leads to a number of non-standard features: Optimal...
Persistent link: https://www.econbiz.de/10010438696
In the context of a canonical agency model, we study the payoff implications of introducing optimally structured incentives. We do so from the perspective of an analyst who does not know the agent's preferences for responding to incentives, but does know that the principal knows them. We...
Persistent link: https://www.econbiz.de/10012806477
This paper investigates the optimal design of incentives when agents distort probabilities. We show that the type of probability distortion displayed by the agent and its degree determine whether an incentivecompatible contract can be implemented, the strength of the incentives included in the...
Persistent link: https://www.econbiz.de/10013460007
We examine the design of incentive-compatible screening mechanisms for dynamic environments in which the agents' types follow a (possibly non-Markov) stochastic process, decisions may be made over time and may affect the type process, and payoffs need not be time-separable. We derive a formula...
Persistent link: https://www.econbiz.de/10008665252
The marginal cost of effort often increases as effort is exerted. In a dynamic moral hazard setting, dynamically increasing costs create information asymmetry. This paper characterizes the optimal contract and helps explain the popular yet thus far puzzling use of non-linear incentives, for...
Persistent link: https://www.econbiz.de/10009699416
The procurement of an innovation involves motivating a research effort to generate a new idea and then implementing that idea efficiently. If research efforts are unverifiable and implementation costs are private information, a trade-off arises between the two objectives. The optimal mechanism...
Persistent link: https://www.econbiz.de/10013013296
We decentralize incentive efficient allocations in large adverse selection economies by introducing a Walrasian market for mechanisms, that is, for menus of contracts. Facing a budget constraint, informed individuals purchase (lottery) tickets to enter mechanisms, while firms sell tickets and...
Persistent link: https://www.econbiz.de/10013080357
We study optimal incentive contracts with multiple agents when performance is evaluated by a reviewer. The reviewer may be biased in favor of the agents, but the degree of bias is unknown to the principal. We show that a contest, which is a contract in which the principal fixes a set of prizes...
Persistent link: https://www.econbiz.de/10012308439