Full Pooling in Multi-Period Contracting with Adverse Selection and Noncommitment

Georges Dionne () and Claude Fluet

No 99-4, Working Papers from HEC Montreal, Canada Research Chair in Risk Management

Abstract: This paper analyses multi-period regulation or procurement policies under asymmetric information between the regulator and regulated firms. As well known in the literature, some degree of separation is always optimal under any form of commitment. In contrast, we show that full pooling is optimal under noncommitment when the discount factor is sufficiently high. We also discuss the meaning of full pooling under double randomization. Finally, we provide a graphical analysis of the second-best policy in terms of the regulator's commitment capacity.

Keywords: Incentives; multi-period contracts; regulation; procurement; renegotiation proofness; asymmetric information; full pooling (search for similar items in EconPapers)
JEL-codes: D82 H57 (search for similar items in EconPapers)
Pages: 26 pages
Date: 1999-08-01
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Related works:
Working Paper: Full pooling in multi-period contracting with adverse selection and noncommitment (1999)
Working Paper: Full Pooling in Multi-Period Contracting with Adverse Selection and Noncommitment (1999)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:crcrmw:1999_004

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