Role Of Linking Mechanisms In Multitask Agency With Hidden Information

Date Added: Mar 2010
Format: PDF

The authors investigate the adverse selection problem where a principal delegates multiple tasks to an agent. They characterize the virtually implementable social choice functions by using the linking mechanism proposed by Jackson and Sonnenschein (2007) that restricts the message spaces. The principal does not require any incentive wage schemes and can therefore avoid any information rent and welfare loss. They show the resemblance between the functioning of this message space restriction and that of incentive wage schemes. They also extend the results of the single-agent model to the multi-agent model.