Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/94033
Authors: 
Jun, Byoung Heon
Wolfstetter, Elmar G.
Year of Publication: 
2012
Series/Report no.: 
SFB/TR 15 Discussion Paper 371
Abstract: 
A principal uses security bid auctions to award an incentive contract to one among several agents, in the presence of hidden action and hidden information. Securities range from cash to equity and call options. 'Steeper' securities are better surplus extractors that narrow the gap between the two highest valuations, yet reduce effort incentives. In view of this trade-off, the generalized equity auction that includes a (possibly negative) cash reward to the winner tends to outperform all other auctions, although it cannot extract the entire surplus implement efficient effort. Hence, profit sharing emerges without risk aversion or limited liability.
Subjects: 
Auctions
agency problems
licensing
innovation
mechanism design
JEL: 
D21
D43
D44
D45
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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