Optimal Contracts under Costly State Falsification

摘要: We examine an exchange economy with two agents: one risk neutral a certain endowment and second averse random endowment. The realization of the is public but can be falsified by agent at cost. For broad class falsification cost functions optimal no-falsification contract noncontingent on left-hand interval strictly increasing slope less than right-hand interval. Under mild further restriction, contracts are, in addition, piece-wise linear. Optimal may general require falsifying state, for set highest realizations there no falsification. find simple conditions under which contract. model has applications that include financial, insurance, employment tax policy.