Direct Mechanisms, Menus and Latent Contracts

Gwenaël Piaser ()
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Gwenaël Piaser: Luxembourg School of Finance, University of Luxembourg

LSF Research Working Paper Series from Luxembourg School of Finance, University of Luxembourg

Abstract: In common agency games, one cannot characterize all equilibria by considering only direct mechanisms. In an attempt to overcome this difficulty, Peters [Econometrica, 2001] and Martimort and Stole [Econometrica, 2002] identified a class of indirect mechanisms (namely, menus) which are able to characterize every equilibrium. Unfortunately, menus are difficult to handle, and several methodologies have been proposed in the literature. Here, it is shown that, even if authors consider menus rather than simpler mechanisms, many equilibria described in the literature could have been characterized by direct incentive compatible mechanisms. Use of more sophisticated mechanisms was not necessary in these cases.

Keywords: Common Agency; Revelation Principle; Delegation Principle; Direct Mechanisms; Menus; Latent Contracts. (search for similar items in EconPapers)
JEL-codes: D82 (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (4)

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