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Robust contracting in general contract spaces

Author

Listed:
  • Julio Backhoff-Veraguas

    (University of Vienna)

  • Patrick Beissner

    (The Australian National University)

  • Ulrich Horst

    (Humboldt-Universität zu Berlin)

Abstract

We consider a general framework of optimal mechanism design under adverse selection and ambiguity about the type distribution of agents. We prove the existence of optimal mechanisms under minimal assumptions on the contract space and prove that centralized contracting implemented via mechanisms is equivalent to delegated contracting implemented via a contract menu under these assumptions. Our abstract existence results are applied to a series of applications that include models of optimal risk sharing and of optimal portfolio delegation.

Suggested Citation

  • Julio Backhoff-Veraguas & Patrick Beissner & Ulrich Horst, 2022. "Robust contracting in general contract spaces," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 73(4), pages 917-945, June.
    • Handle: RePEc:spr:joecth:v:73:y:2022:i:4:d:10.1007_s00199-021-01354-9
    DOI: 10.1007/s00199-021-01354-9
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    References listed on IDEAS

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    Cited by:

    1. Daniel Krv{s}ek & Dylan Possamai, 2023. "Randomisation with moral hazard: a path to existence of optimal contracts," Papers 2311.13278, arXiv.org.

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    More about this item

    Keywords

    Robust contracts; Nonmetrizable contract spaces; Ambiguity; Financial markets;
    All these keywords.

    JEL classification:

    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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