Optimal technology design

• 成果类型: Article
• 署名作者: Garrett, Daniel F.; Georgiadis, George; Smolin, Alex; Szentes, Balazs
• 署名单位: University of Essex; Northwestern University; Universite de Toulouse; Universite Toulouse 1 Capitole; Toulouse School of Economics; University of London; London School Economics & Political Science
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2023.105621
• 发表日期: 2023
• 关键词: Moral hazard; limited liability; contract theory

摘要

This paper considers a moral hazard model with agent limited liability. Prior to interacting with the principal, the agent designs the production technology, which is a specification of his cost of generating each output distribution. After observing the production technology, the principal offers a payment scheme and then the agent chooses a distribution over outputs. We show that there is an optimal design involving only binary distributions (i.e., the cost of any other distribution is prohibitively high), and we characterize the equilibrium technology defined on the binary distributions. Notably, the equilibrium payoff of both players is 1/e.(c) 2023 Elsevier Inc. All rights reserved.