Stochastic mechanisms in settings without monetary transfers: The regular case

Eugen Kovac and Tymofiy Mylovanov

Journal of Economic Theory, 2009, vol. 144, issue 4, pages 1373-1395

Abstract: We analyze relative performance of stochastic and deterministic mechanisms in an environment that has been extensively studied in the literature on communication (e.g., [Vincent P. Crawford, Joel Sobel, Strategic information transmission, Econometrica 50 (6) (1982) 1431-1451]) and optimal delegation (e.g., [Bengt Holmström, On the theory of delegation, in: M. Boyer, R.E. Kihlstrom (Eds.), Bayesian Models in Economic Theory, North-Holland, 1984, pp. 115-141]): a principal-agent model with hidden information, no monetary transfers, and single-peaked preferences. We demonstrate that under the common assumption of quadratic payoffs and a certain regularity condition on the distribution of private information and the agent's bias, the optimal mechanism is deterministic. We also provide an explicit characterization of this mechanism.

Keywords: Optimal; delegation; Cheap; talk; Principal-agent; relationship; No; monetary; transfers; Stochastic; mechanisms (search for similar items in EconPapers)
Date: 2009

Downloads: (external link)
http://www.sciencedirect.com/science/article/B6WJ3 ... 945407de804b7700459f
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:eee:jetheo:v:144:y:2009:i:4:p:1373-1395

Access Statistics for this article

Journal of Economic Theory is edited by A. Lizzeri and K. Shell

More articles in Journal of Economic Theory from Elsevier
Series data maintained by Heidi Boesdal ().