Sellers with Misspecified Models
| Autor: | Kristof Madarasz, Andrea Prat |
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| Rok vydání: | 2016 |
| Předmět: | |
| Zdroj: | The Review of Economic Studies. :rdw030 |
| ISSN: | 1467-937X 0034-6527 |
| DOI: | 10.1093/restud/rdw030 |
| Popis: | Principals often operate on misspecified models of their agents’ preferences. When preferences are such that non-local incentive constraints may bind in the optimum, even slight misspecification of the preferences can lead to large and non-vanishing losses. Instead, we propose a two-step scheme whereby the principal: (1) identifies the model-optimal menu; and (2) modifies prices by offering to share with the agent a fixed proportion of the profit she would receive if an item were sold at the model-optimal price. We show that her loss is bounded and vanishes smoothly as the model converges to the truth. Finally, two-step mechanisms without a sharing rule like (2) will not yield a valid approximation. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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