A Renegotiation-Proof Mechanism for a Principal-Agent Model with Moral Hazard and Adverse Selection
Volume: Volume 20, No. 2
Issue: Summer 1989
Pages: pp. 256-267
Authors: Dominique M. Demougin
Title: A Renegotiation-Proof Mechanism for a Principal-Agent Model with Moral Hazard and Adverse Selection
Abstract: In this article I shall analyze a principal-agent model with moral hazard and adverse selection. I show that for a large class of environments, communication has no value to the principal and that he cannot do better than to average over the different types of agents. This observation is then used to derive a renegotiation-proof mechanism.
JEL Classification
Microeconomics Agent Theory (0228)