Unique Implementation of Incentive Contracts with Many Agents

Ching-to Ma

The Review of Economic Studies, 1988, vol. 55, issue 4, 555-572

Abstract: In this paper we consider the problem of implementation when a principal hires many agents and is not able to monitor their actions. We distinguish two cases: (i) when actions are mutually observable among agents, (ii) when actions are not observable at all. In (i), there is a mechanism in which the first-best arises as a unique perfect equilibrium. In (ii), we show by two examples that typically there are multiple equilibria if the principal merely offers a set of optimal sharing rules. However, we prove that the principal can use these optimal sharing rules as a starting point and construct a multi-stage mechanism that has a unique second-best perfect Bayesian equilibrium.

Date: 1988
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Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:55:y:1988:i:4:p:555-572.

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