Money burning in the theory of delegation

• 成果类型: Article
• 署名作者: Amador, Manuel; Bagwell, Kyle
• 署名单位: University of Minnesota System; University of Minnesota Twin Cities; Federal Reserve System - USA; Federal Reserve Bank - Minneapolis; Stanford University
• 刊物名称: GAMES AND ECONOMIC BEHAVIOR
• ISSN/ISSBN: 0899-8256
• DOI: 10.1016/j.geb.2020.02.010
• 发表日期: 2020
• 页码: 382-412
• 关键词: Optimal delegation; Money burning

摘要

This paper uses a Lagrangian approach to provide sufficient conditions under which money burning expenditures are used in an optimal delegation contract. For comparison, we also establish simple sufficient conditions for the optimality of a cap allocation under a restricted set of preferences for a benchmark setting in which money burning is not allowed. We also apply our findings to a model of cooperation and to a model with quadratic preferences and families of distribution functions. In addition, we provide several comparative statics results. (C) 2020 Elsevier Inc. All rights reserved.