Chapter 2: Multi-Contracting Mechanism Design

Abstract

Incentive Theory is by now a mature field that has deeply changed our view of organiza- tions and markets over the last thirty years or so. In the conceptual framework proposed early on by Hurwicz (1972) and largely inspired by the planification literature, the whole economy is ruled by a single (or complete) grand-contract. Within this framework, de- centralized information and strategic behavior by informed agents at the periphery of the organization can easily be handled by means of simple incentive constraints that fully describe the set of feasible allocations available under asymmetric information. Once equipped with the Revelation Principle,2 modelers are able to describe the feasible se