University / Organisation : Paris School of Economics/EHESS
Paper or project ? paper
Title : Incentive theory with limited communication capacity
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Abstract : I consider a mechanism design problem where the principal and the agent communicate through an imperfect channel financed by the principal. I show that the agent's equilibrium reporting strategy makes the principal investment strategy independent from her bias. Yet, due to incentive problems, both players' strategies are sub-optimal and lead to a welfare loss. I also characterize the unique continuous optimal mechanism under the strict log-concavity of the distribution of the agent's information. I extend (work in progress) those results to a multi-channel and multi-agent framework to see whether correlated information sources allow the principal to reduce her total expenditures.