Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/171085
Authors: 
Kwon, Suehuyn
Year of Publication: 
2017
Series/Report no.: 
CESifo Working Paper 6621
Abstract: 
This paper studies dynamic mechanism design in the presence of moral hazard. Revelation principle extends to models with moral hazard for both full commitment and limited commitment, but I also identify environments in which the principal doesn’t benefit from eliciting agents’ private information or beliefs. One-shot deviation principle requires the knowledge of agents’ private strategies after deviations, and I characterize the necessary and sufficient condition for all IC constraints that requires only the knowledge of agents’ equilibrium strategies. I also provide two sufficient conditions for smaller set of IC constraints that require obedience after a single-period deviation to be sufficient for all IC constraints. I illustrate how to apply revelation principle and the smaller set of IC constraints with an application allowing for endogenous state.
Subjects: 
dynamic mechanism design
adverse selection
moral hazard
revelation principle
one-shot deviation principle
endogenous state
Document Type: 
Working Paper

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