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Robust contracting in general contract spaces

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Abstract

We consider a general framework of optimal mechanism design under adverse selection and ambiguity about the type distribution of agents. We prove the existence of optimal mechanisms under minimal assumptions on the contract space and prove that centralized contracting implemented via mechanisms is equivalent to delegated contracting implemented via a contract menu under these assumptions. Our abstract existence results are applied to a series of applications that include models of optimal risk sharing and of optimal portfolio delegation.

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Acknowledgements

The authors would like to thank the anonymous referees and editors for their valuable advice.

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Authors and Affiliations

  1. Faculty of Mathematics, University of Vienna, Vienna, Austria

    Julio Backhoff-Veraguas

  2. Research School of Economics, The Australian National University, Canberra, Australia

    Patrick Beissner

  3. Department of Mathematics and School of Business and Economics, Humboldt-Universität zu Berlin, Berlin, Germany

    Ulrich Horst

Authors
  1. Julio Backhoff-Veraguas
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  2. Patrick Beissner
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  3. Ulrich Horst
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Correspondence to Patrick Beissner.

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Horst and Beissner gratefully acknowledge financial support by the CRC TRR 190 Rationality and competition - the economic performance of individuals and firms

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Backhoff-Veraguas, J., Beissner, P. & Horst, U. Robust contracting in general contract spaces. Econ Theory 73, 917–945 (2022). https://doi.org/10.1007/s00199-021-01354-9

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