A Renegotiation-Proof Mechanism for a Principal-Agent Model with Moral Hazard and Adverse Selection

Dominique Demougin

RAND Journal of Economics, 1989, vol. 20, issue 2, 256-267

Abstract: In this article I shall analyze a principal-agent model with moral hazard and adverse selection. I show that for a large class of environments, communication has no value to the principal and that he cannot do better than to average over the different types of agents. This observation is then used to derive a renegotiation-proof mechanism.

Date: 1989
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