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Full-Text Articles in Economics
A Principal-Agent Model Of Sequential Testing, Dino Gerardi, Lucas Maestri
A Principal-Agent Model Of Sequential Testing, Dino Gerardi, Lucas Maestri
Cowles Foundation Discussion Papers
This paper analyzes the optimal provision of incentives in a sequential testing context. In every period the agent can acquire costly information that is relevant to the principal’s decision. Neither the agent’s effort nor the realizations of his signals are observable. First, we assume that the principal and the agent are symmetrically informed at the time of contracting. We construct the optimal mechanism and show that the agent is indifferent in every period between performing the test and sending an uninformative message which continues the relationship. Furthermore, in the first period the agent is indifferent between carrying out his task …
The Dynamic Pivot Mechanism, Dirk Bergemann, Juuso Välimäki
The Dynamic Pivot Mechanism, Dirk Bergemann, Juuso Välimäki
Cowles Foundation Discussion Papers
We consider truthful implementation of the socially efficient allocation in an independent private-value environment in which agents receive private information over time. We propose a suitable generalization of the pivot mechanism, based on the marginal contribution of each agent. In the dynamic pivot mechanism, the ex-post incentive and ex-post participation constraints are satisfied for all agents after all histories. In an environment with diverse preferences it is the unique mechanism satisfying ex-post incentive, ex-post participation and efficient exit conditions. We develop the dynamic pivot mechanism in detail for a repeated auction of a single object in which each bidder learns …
The Dynamic Pivot Mechanism, Dirk Bergemann, Juuso Välimäki
The Dynamic Pivot Mechanism, Dirk Bergemann, Juuso Välimäki
Cowles Foundation Discussion Papers
We consider truthful implementation of the socially efficient allocation in an independent private-value environment in which agents receive private information over time. We propose a suitable generalization of the pivot mechanism, based on the marginal contribution of each agent. In the dynamic pivot mechanism, the ex-post incentive and ex-post participation constraints are satisfied for all agents after all histories. In an environment with diverse preferences it is the unique mechanism satisfying ex-post incentive, ex-post participation and efficient exit conditions. We develop the dynamic pivot mechanism in detail for a repeated auction of a single object in which each bidder learns …