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Unique Implementation of Incentive Contracts with Many Agents

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  • Ching-To Ma

Abstract

In this paper we consider the problem of implementation when a principal hires many agents and is not able to monitor their actions. We distinguish two cases: (i) when actions are mutually observable among agents, (ii) when actions are not observable at all. In (i), there is a mechanism in which the first-best arises as a unique perfect equilibrium. In (ii), we show by two examples that typically there are multiple equilibria if the principal merely offers a set of optimal sharing rules. However, we prove that the principal can use these optimal sharing rules as a starting point and construct a multi-stage mechanism that has a unique second-best perfect Bayesian equilibrium.

Suggested Citation

  • Ching-To Ma, 1988. "Unique Implementation of Incentive Contracts with Many Agents," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 55(4), pages 555-572.
    • Handle: RePEc:oup:restud:v:55:y:1988:i:4:p:555-572.
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    File URL: http://hdl.handle.net/10.2307/2297405
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