Mechanism Design with Moral Hazard

Suehuyn Kwon

No 6621, CESifo Working Paper Series from CESifo

Abstract: This paper characterizes when the one-stage deviation IC constraints in the usual sense of dynamic mechanism design are sufficient. One can easily construct examples of when they are not sufficient. If the current state or the belief is not a sufficient summary statics of the agent’s private history, the one-stage deviation IC constraints are not sufficient in general. The paper provides sufficient conditions for when they are sufficient in the usual sense; it also provides a necessary and sufficient condition for all IC constraints if the one-stage deviation IC constraints in the usual sense are not sufficient.

Keywords: dynamic mechanism design; adverse selection; moral hazard; revelation principle; one-shot deviation principle; endogenous state (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-des and nep-mic
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