Incentive Compatibility and Differentiability: New Results and Classic Applications
30 Pages Posted: 28 Sep 2010 Last revised: 22 Aug 2017
Date Written: September 10, 1012
This note provides several generalizations of Mailath's (1987) result that in games of asymmetric information with a continuum of types incentive compatibility plus separation implies differentiability. The new results extend the theory to classic models in finance such as Leland and Pyle (1977), Glosten (1989), and De Marzo and Duffie (1999), that were not previously covered.
Keywords: Adverse Selection, Separation, Differentiable Strategies, Incentive-Compatibility
JEL Classification: C60, C73, D82, D83, G14
Suggested Citation: Suggested Citation