Stochastic Mechanisms in Settings without Monetary Transfers: Regular Case

Eugen Kovac and Tymofiy Mylovanov

No 23/2006, Bonn Econ Discussion Papers from University of Bonn, Bonn Graduate School of Economics (BGSE)

Abstract: We study relative performance of stochastic and deterministic mechanisms in a principal-agent model with hidden information and no monetary transfers. We present an example in which stochastic mechanisms perform strictly better than deterministic ones and can implement any outcome arbitrarily close to the first-best. Nevertheless, under the common assumption of quadratic payoffs and a certain regularity condition on the distribution of private information and the agent's bias, the optimal mechanism is deterministic. We provide an explicit characterization of this mechanism.

Keywords: optimal delegation; cheap talk; principal-agent relationship; no monetary transfers; stochastic mechanisms (search for similar items in EconPapers)
JEL-codes: D78 D82 L22 M54 (search for similar items in EconPapers)
Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/22968/1/bgse23_2006.pdf (application/pdf)

Related works:
Journal Article: Stochastic mechanisms in settings without monetary transfers: The regular case (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:bonedp:232006

Access Statistics for this paper

More papers in Bonn Econ Discussion Papers from University of Bonn, Bonn Graduate School of Economics (BGSE) Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().