Dynamic mechanism design of single forward-looking agent

Abstract

The article mainly studies the optimal mechanism structure and nature of dynamic mechanism design. For forward-looking principals and agents, under the assumptions that the principal has the commitment, and the agent that participates cooperation in each cycle has the fixed-participation cost and the liquidity constraint, the article portrays the link between cycles, and comprehensively considering constraints such as incentive compatibility, a mechanism design model in a dynamic environment was established in the form of recursive equations. Then, the article proposes the concept of dynamic virtual valuation for multi-period problems, which fully considers the client's current income and future earnings. Furthermore, it is found that when the distribution of private information satisfies certain sufficient conditions, the dynamic virtual valuation will still have some special properties, and the structure of the optimal mechanism can be solved.