Stochastic Mechanisms and Quasi-Linear Preferences

C. Schottmuller, J. Boone

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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

Keywords

  • stochastic mechanisms
  • contract theory
  • quasi-linear preferences

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