IDEAS home Printed from https://ideas.repec.org/p/arx/papers/2304.05142.html
   My bibliography  Save this paper

Iterated Revelation: How to Incentive Experts to Complete Incomplete Contracts

Author

Listed:
  • Evan Piermont

Abstract

This paper examines how a decision maker might incentivize an expert to reveal novel aspects of the decision problem, expanding the set of contracts from which the decision maker can choose. The chosen contract will determine, along with the resolution of uncertainty, the payoffs to both players. I show that the set of achievable outcomes under any (incentive compatible) mechanism is characterized by a small and tractable class of iterated revelation mechanisms (IRMs). An IRM is a dynamic interaction wherein each round the expert chooses to reveal some novel contingencies and the decision maker proposes a contract that the expert can accept or reject; the IRM ends after rejection or when nothing novel is revealed. I then consider the set of robust IRMs -- those that maximize the worst case outcome across all types of expert -- and show these are characterized by a principle of myopic optimality: at each round, the decision maker maximizes his payoff as if the expert had nothing further to reveal. The set of robust IRMs also delineate the payoffs achievable by any efficient mechanism.

Suggested Citation

  • Evan Piermont, 2023. "Iterated Revelation: How to Incentive Experts to Complete Incomplete Contracts," Papers 2304.05142, arXiv.org, revised Mar 2024.
  • Handle: RePEc:arx:papers:2304.05142
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/2304.05142
    File Function: Latest version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Jean Tirole, 2009. "Cognition and Incomplete Contracts," American Economic Review, American Economic Association, vol. 99(1), pages 265-294, March.
    2. Halpern, Joseph Y. & Rêgo, Leandro C., 2013. "Reasoning about knowledge of unawareness revisited," Mathematical Social Sciences, Elsevier, vol. 65(2), pages 73-84.
    3. Lei Haoran & Zhao Xiaojian, 2021. "Delegation and Information Disclosure with Unforeseen Contingencies," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 21(2), pages 637-656, June.
    4. Auster, Sarah, 2013. "Asymmetric awareness and moral hazard," Games and Economic Behavior, Elsevier, vol. 82(C), pages 503-521.
    5. Filiz-Ozbay, Emel, 2012. "Incorporating unawareness into contract theory," Games and Economic Behavior, Elsevier, vol. 76(1), pages 181-194.
    6. Piermont, Evan, 2017. "Introspective unawareness and observable choice," Games and Economic Behavior, Elsevier, vol. 106(C), pages 134-152.
    7. Gabriel Carroll, 2019. "Robustness in Mechanism Design and Contracting," Annual Review of Economics, Annual Reviews, vol. 11(1), pages 139-166, August.
    8. Herweg, Fabian & Schmidt, Klaus M., 2020. "Procurement with Unforeseen Contingencies," Munich Reprints in Economics 84781, University of Munich, Department of Economics.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Auster, Sarah & Pavoni, Nicola, 2024. "Optimal delegation and information transmission under limited awareness," Theoretical Economics, Econometric Society, vol. 19(1), January.
    2. Gui, Zhengqing & Huang, Yangguang & Zhao, Xiaojian, 2024. "Financial fraud and investor awareness," Journal of Economic Behavior & Organization, Elsevier, vol. 219(C), pages 104-123.
    3. Piermont, Evan, 2017. "Introspective unawareness and observable choice," Games and Economic Behavior, Elsevier, vol. 106(C), pages 134-152.
    4. Li, Sanxi & Peitz, Martin & Zhao, Xiaojian, 2016. "Information disclosure and consumer awareness," Journal of Economic Behavior & Organization, Elsevier, vol. 128(C), pages 209-230.
    5. Fukuda, Satoshi, 2021. "Unawareness without AU Introspection," Journal of Mathematical Economics, Elsevier, vol. 94(C).
    6. Schipper, Burkhard C., 2021. "Discovery and equilibrium in games with unawareness," Journal of Economic Theory, Elsevier, vol. 198(C).
    7. Haisken-DeNew, John & Hasan, Syed & Jha, Nikhil & Sinning, Mathias, 2018. "Unawareness and selective disclosure: The effect of school quality information on property prices," Journal of Economic Behavior & Organization, Elsevier, vol. 145(C), pages 449-464.
    8. Sarah Auster & Nicola Pavoni, 2020. "Limited Awareness and Financial Intermediation," ECONtribute Discussion Papers Series 043, University of Bonn and University of Cologne, Germany.
    9. Schumacher, Heiner & Thysen, Heidi Christina, 2022. "Equilibrium contracts and boundedly rational expectations," Theoretical Economics, Econometric Society, vol. 17(1), January.
    10. Andreas Haupt & Zoe Hitzig, 2023. "Opaque Contracts," Papers 2301.13404, arXiv.org.
    11. Antoine Dubus, 2020. "Asymmetric awareness and heterogeneous agents," Rationality and Society, , vol. 32(4), pages 461-484, November.
    12. Oliver J. Board & Kim-Sau Chung, 2022. "Object-based unawareness: Theory and applications," The Journal of Mechanism and Institution Design, Society for the Promotion of Mechanism and Institution Design, University of York, vol. 7(1), pages 1-43, December.
    13. Wenjun Ma & Burkhard C. Schipper, 2017. "Does exposure to unawareness affect risk preferences? A preliminary result," Theory and Decision, Springer, vol. 83(2), pages 245-257, August.
    14. Antoine Dubus, 2017. "Asymmetric Awareness and Heterogeneous Agents," Working Papers hal-01521487, HAL.
    15. Ying-Ju Chen & Xiaojian Zhao, 2013. "Solution Concepts of Principal-Agent Models with Unawareness of Actions," Games, MDPI, vol. 4(3), pages 1-24, August.
    16. Karni, Edi & Vierø, Marie-Louise, 2017. "Awareness of unawareness: A theory of decision making in the face of ignorance," Journal of Economic Theory, Elsevier, vol. 168(C), pages 301-328.
    17. Canidio, Andrea & Karle, Heiko, 2022. "The focusing effect in negotiations," Journal of Economic Behavior & Organization, Elsevier, vol. 197(C), pages 1-20.
    18. Martin Meier & Burkhard C. Schipper, 2022. "Conditional dominance in games with unawareness," Working Papers 351, University of California, Davis, Department of Economics.
    19. Wenjun Ma & Burkhard C. Schipper, 2017. "Does exposure to unawareness affect risk preferences? A preliminary result," Theory and Decision, Springer, vol. 83(2), pages 245-257, August.
    20. Burkhard C. Schipper, 2024. "Predicting the Unpredictable under Subjective Expected Utility," Papers 2403.01421, arXiv.org.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:2304.05142. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.