Robust pooling for contracting models with asymmetric information

R.B.O. Kerkkamp, Wilco van den Heuvel and A.P.M. Wagelmans

European Journal of Operational Research, 2019, vol. 273, issue 3, 1036-1051

Abstract: We consider a principal-agent contracting model between a seller and a buyer with single-dimensional private information. The buyer’s type follows a continuous distribution on a bounded interval. We present a new modelling approach where the seller offers a menu of finitely many contracts to the buyer. The approach distinguishes itself from existing methods by pooling the buyer types using a partition. That is, the seller first chooses the number of contracts offered and then partitions the set of buyer types into subintervals. All types in a subinterval are pooled and offered the same contract by the design of our menu.

Keywords: Game theory; Mechanism design; Asymmetric information; Pooling of contracts; Optimal partitioning (search for similar items in EconPapers)
Date: 2019
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Working Paper: Robust Pooling for Contracting Models with Asymmetric Information (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:273:y:2019:i:3:p:1036-1051

DOI: 10.1016/j.ejor.2018.08.041

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