Costless Coordination through Public Contracting

Yating Yuan
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Yating Yuan: University of Warwick

The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics

Abstract: A principal incentivizes a team of agents to work on a joint project. Building on Winter (2004), this paper explores a simple mechanism where agents choose between two public messages, collaborate and ‘monopolize’, and the message profile decides their bonus upon team success. The principal minimizes the total payment while ensuring full effort in outcomes that survive Iterative Elimination of Weakly Dominated Strategies. The optimal mechanism reaches the first-best payment, leaving no rent for strategic uncertainty. Unlike previous results (Winter, 2004; Halac et al., 2021; Cavounidis and Ghosh, 2021), the optimal bonus allocation is neither discriminatory nor private. Thus, effciency need not come at the cost of fairness or transparency.

Date: 2025
New Economics Papers: this item is included in nep-cta, nep-inv, nep-mic and nep-ppm
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Persistent link: https://EconPapers.repec.org/RePEc:wrk:warwec:1561

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