Deterministic versus stochastic mechanisms in principal–agent models
Copyright policy )Deterministic versus stochastic mechanisms in principal–agent models
This paper shows that, contrary to what is generally believed, decreasing concavity of the agent’s utility function with respect to the screening variable is not sufficient to ensure that stochastic mechanisms are suboptimal. The paper demonstrates, however, that they are suboptimal whenever the optimal deterministic mechanism exhibits no bunching. This is the case for most applications of the theory and therefore validates the literature’s usual focus on deterministic mechanisms.
principal-agent theory, mechanism design, deterministic mechanisms, randomization, bunching., 330, ddc:330, principal-agent theory, principal-agent theory; mechanism design; deterministic mechanisms; randomization; bunching., mechanism design, randomization, D82, principal -- agent theory, deterministic mechanisms, principal-agent theory, mechanism design, deterministic mechanisms, randomization., Probabilistic measure theory, Fundamental topics (basic mathematics, methodology; applicable to economics in general), bunching, jel: jel:D82, jel: jel:L23
principal-agent theory, mechanism design, deterministic mechanisms, randomization, bunching., 330, ddc:330, principal-agent theory, principal-agent theory; mechanism design; deterministic mechanisms; randomization; bunching., mechanism design, randomization, D82, principal -- agent theory, deterministic mechanisms, principal-agent theory, mechanism design, deterministic mechanisms, randomization., Probabilistic measure theory, Fundamental topics (basic mathematics, methodology; applicable to economics in general), bunching, jel: jel:D82, jel: jel:L23
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