original papers: Full pooling in multi-period contracting with adverse selection and noncommitment

Georges Dionne () and Claude Fluet

Review of Economic Design, 2000, vol. 5, issue 1, 21 pages

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)
Date: 2000-04-18
Note: Received: 4 December 1996 / 7 October 1999
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Citations: View citations in EconPapers (3)

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