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ItemA general model of coexisting hidden action and hidden informationBasov, S. ; Bardsley, P. ( 2005-12)We consider a general agency model with coexisting hidden actionand hidden information. We prove that, with minor technical qualifications,independence of the production technology from the consumer type isnecessary and sufficient for welfare irrelevance of hidden action. Our resultclarifies and confirms the main conclusion drawn in the existing literatureon mixed models, that if the parties are risk neutral and the productiontechnology is not correlated with private information, then hidden action isirrelevant. However it makes it clear that even under risk neutrality this conclusiondoes not extend to the correlated case, which in practice occurs quitefrequently. We illustrate it with a realistic example where neither hiddenaction nor hidden information on their own lead to welfare losses, while theircombination does.Keywords and Phrases: hidden action, hidden information, Fredholmintegral equations of the first type.
ItemLie groups of partial differential equations and their application to the multidimensional screening problemsBASOV, S (Department of Economics, The University of Melbourne, 2004)In this paper I described group theoretic methods that can be used for analyzing the boundary problems, which arise when the Hamiltonian method is applied to solve the relaxed problem for the multidimensional screening problem. This technique can provide some useful insights into the structure of solutions and some times may help to arrive at particular solutions.