Monopolistic screening under learning by doing

Arbeitspapier

This paper investigates the design of incentives in a dynamic adverse selection framework when agents' production technologies display learning effects and agents' rate of learning is private knowledge. In a simple two-period model with full commitment available to the principal, we show that whether learning effects are over- or under-exploited crucially depends on whether learning effects increase or decrease the principal's uncertainty about agents' costs of production. Hence, what drives the over- or underexploitation of learning effects is whether more efficient agents also learn faster (so costs diverge through learning effects) or whether it is the less efficient agents who learn faster (so costs converge). Furthermore, we show that if divergence in costs through learning effects is strong enough, learning effects will not be exploited at all, in a sense to be made precise.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 0718

Classification and Topics

• Classification: Wirtschaft ; Asymmetric and Private Information; Mechanism Design ; Transactional Relationships; Contracts and Reputation; Networks ; Legal Monopolies and Regulation or Deregulation ; Economics of Regulation ; Innovation and Invention: Processes and Incentives
• Subject: Asymmetric Information ; Learning by Doing ; Regulation ; Lernprozess ; Asymmetrische Information ; Adverse Selektion ; Regulierung ; Prinzipal-Agent-Theorie ; Vertragstheorie ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Gärtner, Dennis
• Event: Veröffentlichung
• (who): University of Zurich, Socioeconomic Institute
• (where): Zurich
• (when): 2007

Further information

• Handle: http://hdl.handle.net/10419/76205
• Last update: 10.03.2025, 11:44 AM CET