We study an adverse selection problem in which information that is imperfectly correlated with the agent's type becomes public ex post. Unbounded penalties are ruled out by assuming that the agent is wealth constrained. The following conclusions emerge. If the agent's utility is increasing in...

In mechanism design problems under incomplete information, it is generally difficult to find decision problems that are first best implementable. A decision problem under incomplete information is first best implementable if there exists a mechanism that extracts the private information and...