nep-cta New Economics Papers
on Contract Theory and Applications
Issue of 2022‒11‒07
four papers chosen by
Guillem Roig
University of Melbourne

  1. Multidimensional Screening and Menu Design in Health Insurance Markets By Hector Chade; Victoria R. Marone; Amanda Starc; Jeroen Swinkels
  2. Optimally Biased Expertise By Pavel Ilinov; Andrei Matveenko; Maxim Senkov; Egor Starkov
  3. Optimally Stubborn By Sanktjohanser, Anna
  4. Obvious manipulations of tops-only voting rules By R. Pablo Arribillaga; Agustin G. Bonifacio

  1. By: Hector Chade; Victoria R. Marone; Amanda Starc; Jeroen Swinkels
    Abstract: We study a general screening model that encompasses a health insurance market in which consumers have multiple dimensions of private information and a price-setting insurer (e.g., a monopolist or a social planner) offers vertically differentiated contracts. We combine theory and empirics to provide three novel results: (i) optimal menus satisfy intuitive conditions that generalize the literature on multidimensional screening and shed light on insurer incentives; (ii) the insurer's problem with an unlimited number of contracts is well-approximated with only a small set of contracts; and (iii) under an additional assumption, the problem becomes dramatically simpler and can be solved using familiar graphical analysis. Calibrated numerical simulations validate assumptions, quantify the differential incentives of a monopolist and a social planner, and evaluate common policy interventions in a monopoly market.
    JEL: I11
    Date: 2022–10
  2. By: Pavel Ilinov; Andrei Matveenko; Maxim Senkov; Egor Starkov
    Abstract: This paper shows that the principal can strictly benefit from delegating a decision to an agent whose opinion differs from that of the principal. We consider a “delegated expertise” problem in which the agent has an advantage in information acquisition relative to the principal, as opposed to having preexisting private information. When the principal is ex ante predisposed towards some action, it is optimal for her to hire an agent who is predisposed towards the same action, but to a smaller extent, since such an agent would acquire more information, which outweighs the bias stemming from misalignment. We show that belief misalignment between an agent and a principal is a viable instrument in delegation, performing on par with contracting and communication in a class of problems.
    Keywords: delegation; rational inattention; heterogeneous beliefs; discrete choice;
    JEL: D82 D83 D91 M51
    Date: 2022–09
  3. By: Sanktjohanser, Anna
    Abstract: Models on reputational bargaining have introduced a perturbation with simple be-havioral types as a way of refining payo˙ predictions for the rational type. I show that this outcome refinement is not robust to the specification of the behavioral type. More specifically, I consider a slight relaxation of the strategy restriction on behavioral types relative to the literature, allowing behavioral types to choose their initial demands. I show that with this relaxation any feasible payo˙ can be achieved in equilibrium for the rational type when the probability of facing a behavioral type is small. My results highlight the implications of di˙erent perturbations for economic applications.
    Date: 2022–10–04
  4. By: R. Pablo Arribillaga; Agustin G. Bonifacio
    Abstract: In a voting problem with a finite set of alternatives to choose from, we study the manipulation of tops-only rules. Since all non-dictatorial (onto) voting rules are manipulable when there are more than two alternatives and all preferences are allowed, we look for rules in which manipulations are not obvious. First, we show that a rule does not have obvious manipulations if and only if when an agent vetoes an alternative it can do so with any preference that does not have such alternative in the top. Second, we focus on two classes of tops-only rules: (i) (generalized) median voter schemes, and (ii) voting by committees. For each class, we identify which rules do not have obvious manipulations on the universal domain of preferences.
    Date: 2022–10

This nep-cta issue is ©2022 by Guillem Roig. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.