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STICERD Economic Theory Seminars

On the principal agent model

Robert Simon (LSE)

Thursday 29 September 2022 15:30 - 17:00

Many of our seminars and public events this year will continue as in person or as hybrid (online and in person) events. Please check our website listings and Twitter feed @STICERD_LSE for updates.

Unless otherwise specified, in-person seminars are open to the public.

Those unable to join the seminars in-person are welcome to participate via zoom if the event is hybrid.

About this event

Harmonising incentive compatibility and individual rationality can be a challenge. Let A be the finite set of possibilities and D(A) its probability simplex. With a continuous function defined on D(A) representing what the agent can guarantee, there is an equilibrium that employs non-deterministic signals. By non-deterministic we mean solutions that are neither pooling nor completely separating. The proof employs a theorem of Borsuk-Ulam type. The Borsuk-Ulam theorem states that a continuous function from an n-dimensional sphere to an n-dimensional Euclidean space has opposite points mapped to the same point. A related theorem shows that starting from any initial probability distribution p in D(A) there is a finite subset V of posterior probabilities (corresponding to signals) and individually rational solutions for every point in V resulting in the same payoff for each state in A (incentive compatibility). The fundamental theorem has been extended in various ways.

Economic Theory Seminars are held on Thursdays in term time at 15:30-17:00, both ONLINE and IN PERSON in SAL 3.05.

Seminar organisers: Dr Andrew Ellis and Dr Christopher Sandmann.

For further information please contact Sadia Ali:

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