Combinatorial agency

Babaioff, M. and Feldman, M. and Nisan, N. and Winter, E. (2012) Combinatorial agency. Journal of Economic Theory, 147 (3). pp. 999-1034. ISSN 0022-0531

Full text not available from this repository.

Abstract

We study a combinatorial variant of the classical principal-agent model. In our setting a principal wishes to incentivize a team of strategic agents to exert costly effort on his behalf. Agents' actions are hidden and the principal observes only the outcome of the team, which depends stochastically on the complex combinations of the efforts by the agents. The principal seeks the mechanism that maximizes the principal's net revenue given an equilibrium behavior of the agents. We investigate the structure of the optimal mechanism for various production technologies as the principal's value from the project varies. In doing so we quantify the gap between the first-best and second-best solutions. Our results highlight the qualitative and quantitative differences between production technologies that exhibit complementarities and substitutabilities between the agents' actions. In comparing the first best with the second best we highlight the role of effort monitoring by the principal. As we shall see, the benefit from monitoring crucially depends on the underlying technology, with the two polar cases being perfect substitution and perfect complementarity. © 2012 Elsevier Inc.

Item Type: Journal Article
Journal or Publication Title: Journal of Economic Theory
Uncontrolled Keywords: /dk/atira/pure/subjectarea/asjc/2000/2002
Subjects:
Departments: Lancaster University Management School > Economics
ID Code: 126918
Deposited By: ep_importer_pure
Deposited On: 14 Aug 2018 14:28
Refereed?: Yes
Published?: Published
Last Modified: 01 Jan 2020 11:29
URI: https://eprints.lancs.ac.uk/id/eprint/126918

Actions (login required)

View Item View Item