Incentive compatibility and differentiability: New results and classic applications

Incentive compatibility and differentiability: New results and classic applications

We provide several generalizations of Mailathʼs (1987) [9] result that in games of asymmetric information with a continuum of types incentive compatibility plus separation implies differentiability of the informed agentʼs strategy. The new results extend the theory to classic models in finance such...

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Veröffentlicht in:Journal of economic theory 2013-09, Vol.148 (5), p.1841-1861
Hauptverfasser: Mailath, George J., von Thadden, Ernst-Ludwig
Format: Artikel
Sprache:eng
Schlagworte:
Adverse selection
Agency
Agency theory
Asymmetric information
Asymmetry
Continuums
Covering
Differentiable strategies
Economic theory
Economics
Finance
Financial models
Game theory
Games
Incentive-compatibility
Incentives
Information science
Separation
Strategic behaviour
Strategy
Studies
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Beschreibung
Zusammenfassung:We provide several generalizations of Mailathʼs (1987) [9] result that in games of asymmetric information with a continuum of types incentive compatibility plus separation implies differentiability of the informed agentʼs strategy. The new results extend the theory to classic models in finance such as Leland and Pyle (1977) [8], Glosten (1989) [4], and DeMarzo and Duffie (1999) [3], that were not previously covered.
ISSN:0022-0531
1095-7235
DOI:10.1016/j.jet.2013.07.004