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Bonn Econ Discussion Papers, Bonn Graduate School of Economics (BGSE), Universität Bonn >
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http://hdl.handle.net/10419/22968
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| Title: | | Stochastic Mechanisms in Settings without Monetary Transfers: Regular Case  |
| Authors: | | Kovac, Eugen Mylovanov, Tymofiy |
| Issue Date: | | 2006 |
| Series/Report no.: | | Bonn econ discussion papers 2006,23 |
| 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. |
| Subjects: | | optimal delegation cheap talk principal-agent relationship no monetary transfers stochastic mechanisms |
| JEL: | | M54 L22 D82 D78 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Bonn Econ Discussion Papers, Bonn Graduate School of Economics (BGSE), Universität Bonn
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