Robust contracting under common value uncertainty
| dc.contributor.author | AUSTER, Sarah | |
| dc.date.accessioned | 2018-12-06T13:55:16Z | |
| dc.date.available | 2018-12-06T13:55:16Z | |
| dc.date.issued | 2018 | |
| dc.description | First published: 01 February 2018 | en |
| dc.description | This is an open access article licensed under the Creative Commons Attribution-NonCommercial License 4.0 (http://econtheory.org) | |
| dc.description.abstract | A buyer makes an offer to a privately informed seller for a good of uncertain quality. Quality determines both the seller's valuation and the buyer's valuation, and the buyer evaluates each contract according to its worst-case performance over a set of probability distributions. This paper demonstrates that the contract that maximizes the minimum payoff over all possible probability distributions of quality is a screening menu that separates all types, whereas the optimal contract for any given probability distribution is a posted price, which induces bunching. Using the epsilon-contamination model, according to which the buyer's utility is a weighted average of his single prior expected utility and the worst-case scenario, the analysis further shows that for intermediate degrees of confidence, the optimal mechanism combines features of both of these contracts. | |
| dc.format.mimetype | application/pdf | |
| dc.identifier.citation | Theoretical economics, 2018, Vol. 13, No. 1, pp. 175-204 | |
| dc.identifier.doi | 10.3982/TE2385 | |
| dc.identifier.endpage | 204 | |
| dc.identifier.issn | 1555-7561 | |
| dc.identifier.issue | 1 | |
| dc.identifier.startpage | 175 | |
| dc.identifier.uri | https://hdl.handle.net/1814/59926 | |
| dc.identifier.volume | 13 | |
| dc.language.iso | en | |
| dc.publisher | Econometric Society | en |
| dc.relation.ispartof | Theoretical economics | |
| dc.rights | info:eu-repo/semantics/openAccess | |
| dc.subject | Ambiguity | |
| dc.subject | Optimal contracting | |
| dc.subject | Lemons problem | |
| dc.subject | Mechanism design | en |
| dc.title | Robust contracting under common value uncertainty | |
| dc.type | Article | en |
| dspace.entity.type | Publication | |
| eui.subscribe.skip | true | |
| person.identifier.other | 33426 | |
| relation.isAuthorOfPublication | 3f18d4f5-ef93-4ded-9752-239252c42047 | |
| relation.isAuthorOfPublication.latestForDiscovery | 3f18d4f5-ef93-4ded-9752-239252c42047 |
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