original papers : Implementation of optimal contracts under adverse selection

This paper studies a 2-agent, 2-type principal-multiagent model of adverse selection under the assumption that the agents each have complete information. We construct a mechanism implementing the first-best contracts in Nash equilibrium that: satisfies a condition related to individual rationality, is renegotiation-proof, has a small-sized message space, achieves unique implementation and satisfies undomination of Nash equilibrium strategies. Moreover, we prove that other requirements which relate to individual rationality (different from the one satisfied by our mechanism) are not compatible with implementation of the first-best contracts.