{"title":"Epsilon-Efficiency in a Dynamic Partnership with Adverse Selection and Moral Hazard","authors":"V. Cao","doi":"10.1515/bejte-2020-0089","DOIUrl":null,"url":null,"abstract":"Abstract For a dynamic partnership with adverse selection and moral hazard, we design a direct profit division mechanism that satisfies ϵ-efficiency, periodic Bayesian incentive compatibility, interim individual rationality, and ex-post budget balance. In addition, we design a voting mechanism that implements the profit division rule associated with this direct mechanism in perfect Bayesian equilibrium. For establishing these possibility results, we assume that the partnership exhibits intertemporal complementarities instead of contemporaneous complementarities; equivalently, an agent’s current effort affects other agents’ future optimal efforts instead of current optimal efforts. This modelling assumption fits a wide range of economic settings.","PeriodicalId":44773,"journal":{"name":"B E Journal of Theoretical Economics","volume":"23 1","pages":"73 - 119"},"PeriodicalIF":0.3000,"publicationDate":"2021-11-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"B E Journal of Theoretical Economics","FirstCategoryId":"96","ListUrlMain":"https://doi.org/10.1515/bejte-2020-0089","RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q4","JCRName":"ECONOMICS","Score":null,"Total":0}
引用次数: 0
Abstract
Abstract For a dynamic partnership with adverse selection and moral hazard, we design a direct profit division mechanism that satisfies ϵ-efficiency, periodic Bayesian incentive compatibility, interim individual rationality, and ex-post budget balance. In addition, we design a voting mechanism that implements the profit division rule associated with this direct mechanism in perfect Bayesian equilibrium. For establishing these possibility results, we assume that the partnership exhibits intertemporal complementarities instead of contemporaneous complementarities; equivalently, an agent’s current effort affects other agents’ future optimal efforts instead of current optimal efforts. This modelling assumption fits a wide range of economic settings.
期刊介绍:
We welcome submissions in all areas of economic theory, both applied theory and \"pure\" theory. Contributions can be either innovations in economic theory or rigorous new applications of existing theory. Pure theory papers include, but are by no means limited to, those in behavioral economics and decision theory, game theory, general equilibrium theory, and the theory of economic mechanisms. Applications could encompass, but are by no means limited to, contract theory, public finance, financial economics, industrial organization, law and economics, and labor economics.