Contractual Design with Correlated Information under Limited Liability

Demougin, Dominique; Garvie, Devon

doi:10.2307/2600983

Cited by 51 publications

(48 citation statements)

References 4 publications

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“…LL constraints have both theoretical and practical appeal (e.g. Innes 1990;Demougin and Garvie 1991). On the practical side, LL constraints act as "payment floors" that prevent the processor from promising excessively low or negative payments in some states of the world.…”

Section: The Modelmentioning

confidence: 99%

Producer Protection Legislation and Termination Damages in the Presence of Contracting Frictions

Wu¹

2010

American J Agri Economics

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Section: The Modelmentioning

confidence: 99%

Producer Protection Legislation and Termination Damages in the Presence of Contracting Frictions

Wu¹

2010

American J Agri Economics

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“…First, full surplus extraction critically relies on risk-neutrality or unlimited liability of buyers (Roberts, 1991, Demougin andGarvie, 1991) or on the absence of collusion by buyers (Laffont and Martimort, 2000). In principle, these concerns apply to a literal interpretation of my construction, too.…”

Section: Introductionmentioning

confidence: 99%

Auction design with endogenously correlated buyer types

Krähmer

2012

Journal of Economic Theory

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“…They show that the first-best allocation cannot be implemented when the agent types are approximately independent, and either the monetary transfers amongst agents or their ex post payoffs have to satisfy a limited liability constraint. Demougin and Garvie (1991) study optimal regulation with a continuum of firm types, correlated information and non-negative limited liability constraints. Gary-Bobo and Spiegel (forthcoming) 3 study an optimal regulation problem with a continuous type space and finite signals, and assume the same conditions on costs and signals found in RS, but with the restriction that ex post payoffs of the agent are not allowed to fall below a certain level in every state.…”

Section: Introductionmentioning

confidence: 99%

Optimal use of correlated information in mechanism design when full surplus extraction may be impossible

Bose

Zhao

2007

Journal of Economic Theory

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Emre Ozdenoren, Ennio Stacchetti, an anonymous referee, and an associate editor for insightful and extremely helpful comments. The usual disclaimer applies. AbstractWe study the mechanism design problem when the principal can condition the agent's transfers on the realization of ex post signals that are correlated with the agents' types. Crémer and McLean (Econometrica, 53(1985) 345-361; 56(1988) 1247-1258, McAfee and Reny (Econometrica, 6(1992) 395-421), Riordan and Sappington (JET, 45(1988) 189-199) studied situations where either the signals are rich enough, or the conditional signal distributions and agents' payoffs are such that a mechanism can be designed to fully extract the surplus from every agent. In this paper, we study the optimal utilization of the signals when full surplus extraction may not be possible. We assume that the cardinality of the signal space is smaller than that of the type space and the Riordan and Sappington conditions do not always hold. We study the optimal ways to utilize the signals. For some tractable special cases, we investigate the optimal mechanism and the level of surplus that can be extracted, and identify the agent types who obtain rent.

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Contractual Design with Correlated Information under Limited Liability

Cited by 51 publications

References 4 publications

Producer Protection Legislation and Termination Damages in the Presence of Contracting Frictions

Producer Protection Legislation and Termination Damages in the Presence of Contracting Frictions

Auction design with endogenously correlated buyer types

Optimal use of correlated information in mechanism design when full surplus extraction may be impossible

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