Incentive Compatibility and Differentiability: New Results and Classic Applications

30 Pages Posted: 28 Sep 2010 Last revised: 22 Aug 2017

See all articles by George J. Mailath

George J. Mailath

University of Pennsylvania - Department of Economics; Research School of Economics, ANU

Ernst-Ludwig von Thadden

Universitaet Mannheim; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Date Written: September 10, 1012

Abstract

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

Mailath, George J. and von Thadden, Ernst-Ludwig, Incentive Compatibility and Differentiability: New Results and Classic Applications (September 10, 1012). Journal of Economic Theory, Vol. 148, No. 5, 2013, PIER Working Paper No. 10-32, Available at SSRN: https://ssrn.com/abstract=1683471 or http://dx.doi.org/10.2139/ssrn.1683471

George J. Mailath (Contact Author)

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
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HOME PAGE: http://web.sas.upenn.edu/gmailath/

Research School of Economics, ANU ( email )

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College of Business and Economics
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Australia

Ernst-Ludwig Von Thadden

Universitaet Mannheim ( email )

Department of Economics
Mannheim, 68131
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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