Duality in Contracting

Peter Bardsley

No 1141, Department of Economics - Working Papers Series from The University of Melbourne

Abstract: In a linear contracting environment the Fenchel transform provides a complete duality between the contract and the information rent. Through an appropriate generalised convexity this can be extended to provide a complete duality in the supermodular quasilinear contracting environment that covers the majority of applications. Using this framework, we provide a complete characterization of the allocation correspondences that can be implemented by a principal in this environment. We also address the question of when an allocation can be implemented by a menu of simple contracts. Along the way, a supermodular envelope theorem is proved, somewhat different in nature to the Milgrom Segal result.

Keywords: mechanism design; contract theory; duality; Fenchel transform; abstract convexity (search for similar items in EconPapers)
JEL-codes: D82 D86 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2012
New Economics Papers: this item is included in nep-cta and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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