Who and How? Adverse Selection and flexible Moral Hazard
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arXiv
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| Hauptverfasser: | , , |
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| Format: | Preprint |
| Veröffentlicht: |
2025
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| _version_ | 1866908536663965696 |
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| author | Castro-Pires, Henrique Kattwinkel, Deniz Knoepfle, Jan |
| author_facet | Castro-Pires, Henrique Kattwinkel, Deniz Knoepfle, Jan |
| contents | We characterize incentive compatible mechanisms in environments with hidden types and flexible hidden actions. Our approach introduces extended recommendation schedules that specify prescribed actions also off-path, after misreports. This approach yields a tractable and complete characterization of incentive compatibility, which includes a generalized integral monotonicity condition capturing the interaction between adverse selection and moral hazard. We demonstrate the usefulness of the characterization across a range of contracting problems. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2506_12979 |
| institution | arXiv |
| publishDate | 2025 |
| record_format | arxiv |
| spellingShingle | Who and How? Adverse Selection and flexible Moral Hazard Castro-Pires, Henrique Kattwinkel, Deniz Knoepfle, Jan Theoretical Economics We characterize incentive compatible mechanisms in environments with hidden types and flexible hidden actions. Our approach introduces extended recommendation schedules that specify prescribed actions also off-path, after misreports. This approach yields a tractable and complete characterization of incentive compatibility, which includes a generalized integral monotonicity condition capturing the interaction between adverse selection and moral hazard. We demonstrate the usefulness of the characterization across a range of contracting problems. |
| title | Who and How? Adverse Selection and flexible Moral Hazard |
| topic | Theoretical Economics |
| url | https://arxiv.org/abs/2506.12979 |