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Mechanism Design with Non-Contractible Information

Seung Han Yoo ()

No 1604, Discussion Paper Series from Institute of Economic Research, Korea University

Abstract: Contracting with an agent whose type contains non-contractible information, a principal considers mechanisms with an informed third party, a manager. To make the manager report the information truthfully, the principal devises the rst-order alignment, an aligned contract based on the first-order condition optimality. We show that the mechanism contracting simultaneously with the manager and the agent can dominate the optimal "selling the project" mechanism. The dominance, combined with the manager's information acquisition costs, results in three optimal organizational structures, the simultaneous contracting, ex-ante contracting or partial revelation

Keywords: Non-contractible information; First-order alignment; Simultaneous contracting (search for similar items in EconPapers)
JEL-codes: D21 D82 D86 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cta, nep-gth, nep-hpe, nep-mic and nep-ore
Date: 2016
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