Backhoff-Veraguas, Julio (University of Twente)
Beissner, Patrick (Australian National University)
Horst, Ulrich (HU Berlin)
We consider a general framework of optimal mechanism design under adverse selection and ambiguity about the type distribution of agents. We prove the existence of optimal mechanisms under minimal assumptions on the contract space and prove that centralized contracting implemented via mechanisms is equivalent to delegated contracting implemented via a contract menu under these assumptions. Our abstract existence results are applied to a series of applications that include models of optimal risk sharing and of optimal portfolio delegation.
robust contracts; nonmetrizable contract spaces; ambiguity; financial markets