Optimality of linearity with collusion and renegotiation

This study analyzes a continuous-time N-agent Brownian hidden-action model with exponential utilities, in which agents' actions jointly determine the mean and the variance of the outcome process. In order to give a theoretical justi¯cation for the use of linear contracts, as in Holmstrom and Milgrom (1987), we consider a variant of its generalization given by Sung (1995), into which collusion and renegotiation possibilities among agents are incorporated. In this model, we prove that there exists a linear and stationary optimal compensation scheme which is also immune to collusion and renegotiation.Principal-agent problems; moral hazard; linear contracts; continuous-time model; Brownian motion martingale method; collusion,; renegotiation; team

Incentives under collusion in a two-agent hidden-action model of a financial enterprize

This study analyzes collusion in an enterprize in which concerns about hedging cannot be ignored. In our two-agent single-task hidden-action model, where all the parties involved have exponential utility functions and the principal owning normally distributed observable and verifiable returns is restricted to o®er linear contracts, agents may exploit all feasible collusion opportunities via enforceable side contracts. Hence in general, an optimal incentive compatible and individually rational contract is not necessarily immune to collusion. We demonstrate that collusion may be ignored when making the agents work with the highest effort profile is profitable for the principal and either of the following holds: (1) mean of the return is only a®ected by the first agent's effort level, whereas variance of that is only affected by the second agent's, (2) mean is increasing and variance is decreasing separately in effort levels of both of them. On the other hand, for situations in which any of these assumptions are violated, numerical examples, showing that collusion may make the principal strictly worse off, are provided. For the justification of linear contracts as was done in the model of Holmstrom and Milgrom (1987) we consider a variant of its generalization given by Sung (1995), into which collusion possibilities are incorporated. In that continuous-time repeated agency problem including collusion, we prove the optimality of linear contracts

Optimality of linearity with collusion and renegotiation

This study analyzes a continuous-time N-agent Brownian hidden-action model with exponential utilities, in which agents' actions jointly determine the mean and the variance of the outcome process. In order to give a theoretical justification for the use of linear contracts, as in Holmstrom and Milgrom (1987), we consider a variant of its generalization given by Sung (1995), into which collusion and renegotiation possibilities among agents are incorporated. In this model, we prove that there exists a linear and stationary optimal compensation scheme which is also immune to collusion and renegotiation

Truth-telling and Trust in Sender-receiver Games with Intervention

Recent experimental studies find excessive truth-telling in strategic information transmission games with conflictive preferences. In this paper, we show that this phenomenon is more pronounced in sender-receiver games where a truthful regulator randomly intervenes. We also establish that intervention significantly increases the excessive trust of receivers.Strategic information transmission, truth-telling, trust, sender-receiver game.

Modeling and Characterization of A Pull-in Free MEMS Microphone

In this study, we examine the feasibility of designing a MEMS microphone employing a levitation based electrode configuration. This electrode scheme enables capacitive MEMS sensors that could work for large bias voltages without pullin failure. Our experiments and simulations indicate that it is possible to create robust sensors properly working at high DC voltages, which is not feasible for most of the conventional parallel plate electrode-based micro-scale devices. In addition, the use of larger bias voltages will improve signal-to-noise ratios in MEMS sensors because it increases the signal relative to the noise in read-out circuits. This study presents the design, fabrication, and testing of a capacitive microphone, which is made of approximately 2 m thick highly-doped polysilicon as a diaphragm. It has approximately 1 mm 2 surface area and incorporates interdigitated sensing electrodes on three of its sides. Right underneath these moving electrodes, there are fixed fingers having held at the same voltage potential as the moving electrodes and separated from them with a 2 m thick air gap. The electronic output is obtained using a charge amplifier. Measured results obtained on three different microphone chips using bias voltages up to 200 volts indicate that pull-in failure is completely avoided. The sensitivity of this initial design was measured to be 16.1 mV/Pa at 200 V bias voltage, and the bandwidth was from 100 Hz to 4.9 kHz

Dynamic Response of a Tunable MEMS Accelerometer Based on Repulsive Force

This paper describes a tunable MEMS electrostatic accelerometer that uses repulsive electrode configuration so that the design is not hampered by capacitive pull-in instability. The repulsive force configuration enables the increase of DC bias voltage without suffering from the pull-in failure mode. This flexibility in increasing voltage can be employed as a tuning parameter to widen the working frequency range and to improve the robustness of the accelerometer. A lumped parameter model is developed to simulate the response of the microstructure under a combination of electrostatic and dynamic mechanical loading. The electrostatic force is estimated using a finite element simulation. The nonlinear equations of motion are solved for harmonic base excitations and halfsineshockloadsusingtheshootingandthelong-timeintegrationmethods,respectively. Tovalidatethemodel,asensorisfabricated and characterized under harmonic base excitation and mechanical shocks. A mechanical sensitivity of 0.1µm g is achieved when the bias voltage is 40(V). The experimental data are in good agreement with the simulation results. The comprehensive dynamical characterization presented in this study contributes to the development of functional accelerometers with tunable capabilities to harmonic and shock accelerations

Team beats collusion

This paper analyzes optimal contracts in a linear hidden-action model with normally distributed returns possessing two moments that are governed jointly by two agents, who can observe each others' effort levels and draft enforceable side-contracts on chosen effort levels and realized returns. After showing that standard constraints, resulting in incentive-contracts, may fail to ensure implementability, we examine (centralized) collusion-proof contracts and (decentralized) team-contracts. We prove that optimal team-contracts provide the highest implementable returns to the principal. In other words, the principal may restrict attention to outsourcing/decentralization without any loss of generality. Moreover, situations in which incentive-contracts are collusion-proof, thus implementable, are fully characterized

Team beats collusion

This paper analyzes optimal contracts in a linear hidden-action model with normally distributed returns possessing two moments that are governed jointly by two agents, who can observe each others' effort levels and draft enforceable side-contracts on chosen effort levels and realized returns. After showing that standard constraints, resulting in incentive-contracts, may fail to ensure implementability, we examine (centralized) collusion-proof contracts and (decentralized) team-contracts. We prove that optimal team-contracts provide the highest implementable returns to the principal. In other words, the principal may restrict attention to outsourcing/decentralization without any loss of generality. Moreover, situations in which incentive-contracts are collusion-proof, thus implementable, are fully characterized