Incentive Compatibility and Differentiability New Results and Classic Applications

Mailath, George J. and Thadden, Ernst-Ludwig von (21. January 2013): Incentive Compatibility and Differentiability New Results and Classic Applications. SFB/TR 15 Discussion Paper No. 447

Abstract

We provide several generalizations of Mailath's (1987) result that in games of asymmetric information with a continuum of types incentive compatibility plus separation implies differentiability of the informed agent's strategy. The new results extend the theory to classic models in finance such as Leland and Pyle (1977), Glosten (1989), and DeMarzo and Duffie (1999), that were not previously covered.

• Item Type: Paper
• Keywords: Adverse selection, separation, differentiable strategies, incentive compatibility
• Faculties: Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems; Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems > C9 - Stabilität, Wettbewerb und Liquidität in Finanzmärkten
• Subjects: 300 Social sciences > 330 Economics
• JEL Classification: C60, C73, D82, D83, G14
• Language: English