Governments must usually take policy decisions with an imperfect knowledge of the economic actors' type or the actors' effort level. These issues are addressed within the framework of classic adverse selection or moral hazard models. I discuss in this paper how would the government’s and the...

In this paper, we examine the optimal mechanism design of selling an indivisible object to one regular buyer and one publicly known buyer, where inter-buyer resale cannot be prohibited. The resale market is modeled as a stochastic ultimatum bargaining game between the two buyers. We fully...

I study the properties of optimal long-term contracts in an environment in which the agent's type evolves stochastically over time. The model stylizes a buyer-seller relationship but the results apply quite naturally to many contractual situations including regulation and optimal...

In the context of a canonical agency model, we study the payoff implications of introducing optimally structured incentives. We do so from the perspective of an analyst who does not know the agent's preferences for responding to incentives, but does know that the principal knows them. We...

This paper generalizes a conceptual insight in dynamic contracting with quasilin- ear payoffs: the principal does not need to pay any information rents for extract- ing the agent’s “new” private information obtained after signing the contract. This is shown in a general model in which the...

We modelize and investigate the analytical rationale of employing bilateral mechanism design, which simplifies collective mechanism design by ignoring relative information evaluation, in generalized multi-agency contracting games under Bayesian Nash equilibrium. We permit interdependent...

In this chapter we study dynamic incentive models in which risk sharing is endogenously limited by the presence of informational or enforcement frictions. We comprehensively overview one of the most important tools for the analysis such problems—the theory of recursive contracts. Recursive...

We characterize the optimal incentive scheme for a manager who faces costly effort decisions and whose ability to generate profits for the firm varies stochastically over time. The optimal contract is obtained as the solution to a dynamic mechanism design problem with hidden actions and...

This paper aims to characterise a dynamic, incentive-compatible contract for the provision of health services, allowing for both moral hazard and adverse selection. Patients' severity changes over time following a stochastic process and is private information of the provider. We characterise the...

The paper extends the optimal delegation framework pioneered by Holmström (1977, 1984) to a dynamic environment where, at the outset, the agent privately knows his ability to interpret decision relevant private information received later on. We show that any mechanism can be implemented by a...