Stochastic Mechanisms and Quasi-Linear Preferences

C. Schottmuller, J. Boone

Research output: Working paperDiscussion paperOther research output

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Abstract

Abstract: Many optimal contracting papers use quasi-linear preferences. To exclude stochastic mechanisms they impose a (sufficient) condition on how the curvature of an agent's objective function varies with type. We show with quasi-linear preferences that an optimal deterministic outcome without bunching implies that stochastic mechanisms are not optimal (without any additional assumptions).
Original languageEnglish
Place of PublicationTilburg
PublisherEconomics
Number of pages17
Volume2012-047
Publication statusPublished - 2012

Publication series

NameCentER Discussion Paper
Volume2012-047

Fingerprint

Objective function
Bunching
Curvature
Contracting

Keywords

  • stochastic mechanisms
  • contract theory
  • quasi-linear preferences

Cite this

Schottmuller, C., & Boone, J. (2012). Stochastic Mechanisms and Quasi-Linear Preferences. (CentER Discussion Paper; Vol. 2012-047). Tilburg: Economics.
Schottmuller, C. ; Boone, J. / Stochastic Mechanisms and Quasi-Linear Preferences. Tilburg : Economics, 2012. (CentER Discussion Paper).
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Schottmuller, C & Boone, J 2012 'Stochastic Mechanisms and Quasi-Linear Preferences' CentER Discussion Paper, vol. 2012-047, Economics, Tilburg.

Stochastic Mechanisms and Quasi-Linear Preferences. / Schottmuller, C.; Boone, J.

Tilburg : Economics, 2012. (CentER Discussion Paper; Vol. 2012-047).

Research output: Working paperDiscussion paperOther research output

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AB - Abstract: Many optimal contracting papers use quasi-linear preferences. To exclude stochastic mechanisms they impose a (sufficient) condition on how the curvature of an agent's objective function varies with type. We show with quasi-linear preferences that an optimal deterministic outcome without bunching implies that stochastic mechanisms are not optimal (without any additional assumptions).

KW - stochastic mechanisms

KW - contract theory

KW - quasi-linear preferences

M3 - Discussion paper

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PB - Economics

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Schottmuller C, Boone J. Stochastic Mechanisms and Quasi-Linear Preferences. Tilburg: Economics. 2012. (CentER Discussion Paper).