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Direct Mechanisms, Menus and Latent Contracts

Author

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  • Gwenaël Piaser

    (Luxembourg School of Finance, University of Luxembourg)

Abstract

In common agency games, one cannot characterize all equilibria by considering only direct mechanisms. In an attempt to overcome this difficulty, Peters [Econometrica, 2001] and Martimort and Stole [Econometrica, 2002] identified a class of indirect mechanisms (namely, menus) which are able to characterize every equilibrium. Unfortunately, menus are difficult to handle, and several methodologies have been proposed in the literature. Here, it is shown that, even if authors consider menus rather than simpler mechanisms, many equilibria described in the literature could have been characterized by direct incentive compatible mechanisms. Use of more sophisticated mechanisms was not necessary in these cases.

Suggested Citation

  • Gwenaël Piaser, 2007. "Direct Mechanisms, Menus and Latent Contracts," LSF Research Working Paper Series 07-09, Luxembourg School of Finance, University of Luxembourg.
    • Handle: RePEc:crf:wpaper:07-09
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    File URL: http://www.lsf.lu/eng/content/download/491/2672/file/07-09.pdf
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    Cited by:

    1. Andrea Attar & Thomas Mariotti & François Salanié, 2011. "Nonexclusive Competition in the Market for Lemons," Econometrica, Econometric Society, vol. 79(6), pages 1869-1918, November.

    More about this item

    Keywords

    Common Agency; Revelation Principle; Delegation Principle; Direct Mechanisms; Menus; Latent Contracts.;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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