Robust mechanisms: the curvature case

Carrasco, Vinícius; Luz, Vitor Farinha; Monteiro, Paulo Klinger; Moreira, Humberto

doi:10.1007/s00199-018-1120-1

Cited by 13 publications

(14 citation statements)

References 15 publications

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“…Much as Carrasco et al (2015) do, we show that a variant of the model in which the agent's type evolves over time and satisfies a martingale property leads to a time-invariant robust mechanism: the period by period repetition of the static mechanism is optimal. This -along with the fact that we consider maxmin design (with the restriction that expected values follows martingale 3 ) and allow for general mechanisms -is the main difference from what is obtained by Handel and Misra (forthcoming).…”

Section: Related Literaturementioning

confidence: 76%

“…In their first paper, they consider the case in which the seller designs a mechanism to minimize the maximum regret, whereas in the second they also consider a max min procedure. In independent work, Carroll (2013) and Carrasco et al (2015) consider a setting in which only one moment of the distribution of willingness to pay of the consumer is known. Our paper differs from all this by considering the case of curvature in ex-post payoffs.…”

Section: Related Literaturementioning

confidence: 99%

“…In search for predictions for contracting models that do not rely on fine details of their primitives -which, in practice, are unlikely to be known by real world designers -a growing literature assumes that a principal (she) might not be fully aware of the distribution form which an agent's (he) private information is drawn, e.g., Bergemann and Schlag (2008), Carroll (2013), Carrasco et al (2015).…”

Section: Introductionmentioning

confidence: 99%

“…However, one can still recast, as Bergemann and Schlag (2008) and Carrasco et al (2015) do, the robust design problem as a zero-sum game played by the designer and an adversarial nature, who chooses distribution for the agent's private information to minimize the designer expected payoffs. A Nash equilibrium of such game is, then, the robust mechanism and the worst case distribution.…”

Section: Introductionmentioning

confidence: 99%

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Robust Mechanisms: The Curvature Case

et al. 2017

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThis note considers the problem of a principal (she) who faces a privately informed agent (he) and only knows one moment of the distribution from which his types are drawn.Payoffs are non-linear in the allocation and the principal maximizes her worst-case expected profits. We recast the robust design problem as a zero-sum game played by the principal and an adversarial nature who seeks to minimize her expected payoffs. The robust mechanism and the worst case distribution are, then, the Nash equilibrium of such game. A robustness property of the optimal mechanism imposes restrictions on the principal's ex-post profit function. These restrictions then lead to the optimal mechanism. The robust mechanism entails exclusion of low types and distortions at the intensive margin that (in a precise sense)are larger than what those that prevail in standard Bayesian mechanism design problems. D86 (Economics of Contract Theory) * This note is being extended to incorporate two sets of analysis: (i) a dynamic version of the main model in which the agent's information evolves over time and all is known by the principal is that types satisfy a martingale condition, and (ii) a multidimensional version of the model. We are also working on the full derivation of examples (e.g., regulation and taxation) that use the results this work derives. A paper incorporating (i), (ii) and the examples will subsume this note.† We have benefited from conversations with Gabriel Carroll, Nicolás Figueroa, Stephen Morris, Leonardo Rezende and Yuliy Sannikov. Moreira gratefully acknowledges financial support from CNPq.

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Section: Related Literaturementioning

confidence: 76%

Section: Related Literaturementioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Robust Mechanisms: The Curvature Case

et al. 2017

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“…Our dual problem has a similar interpretation to Carrasco et al. (2019) where the adverse nature chooses the most unfavorable distribution to minimize the decision maker's utility. From an RO perspective, this new IC constraint ensures that the robust contract remains feasible for a wide range of distributions 1…”

Section: Introductionmentioning

confidence: 94%

Salesforce Compensation and Two‐Sided Ambiguity: Robust Moral Hazard with Moment Information

Kirshner

2021

Production and Operations Management

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We analyze a salesforce principal‐agent model where both the firm and sales agent have limited information on the effort‐dependent demand distribution, creating two‐sided ambiguity. Under the max–min decision criteria, the firm offers a contract to the agent who exerts unobservable effort to influence the demand distribution. We formulate the problem as a semi‐infinite program and use the agent's shadow prices to construct the least expensive contract. Next, we use the least expensive contract to create a non‐linear optimization model, which provides the firm's optimal robust contract. Due to the problem's complexity, we focus our attention on the class of distribution‐free contracts. We show that using a distribution‐free contract is a necessary condition for achieving the first‐best outcome. Our analysis reveals that the index of dispersion determines whether the optimal distribution‐free contract is linear or quadratic. Finally, we extend our model to incorporate quota‐bonus contracts and inventory considerations. Overall, our results demonstrate that variance information plays a critical role in designing contracts under distributional ambiguity and provides justification for the application of quadratic contracts in practice.

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Persuasion in an asymmetric information economy: a justification of Wald’s maxmin preferences

Liu

Yannelis

2021

Econ Theory

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Robust mechanisms: the curvature case

Cited by 13 publications

References 15 publications

Robust Mechanisms: The Curvature Case

Robust Mechanisms: The Curvature Case

Salesforce Compensation and Two‐Sided Ambiguity: Robust Moral Hazard with Moment Information

Persuasion in an asymmetric information economy: a justification of Wald’s maxmin preferences

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