A principal incentivizes a group of agents to work by choosing a monitoring structure and a scheme of performance-contingent rewards. The monitoring structure partitions the set of agents into monitoring teams, each delivering a signal of joint performance. We show that unlike under partial implementation, the principal always exhausts her monitoring capacity to optimally implement work as a unique outcome. Optimal monitoring teams are homogeneous between them: equally sized and with agents allocated in an anti-assortative fashion. Higher-effort-cost agents receive lower rents, and they tend to be monitored more closely than lower-effort-cost agents when the principal's allocation is constrained.
We characterize the revenue-maximizing information structure in the second-price auction. The seller faces a trade-off: more information improves the efficiency of the allocation but creates higher information rents for bidders. The information disclosure policy that maximizes the revenue of the seller is to fully reveal low values (where competition is high) but to pool high values (where competition is low). The size of the pool is determined by a critical quantile that is independent of the distribution of values and only dependent on the number of bidders. We discuss how this policy provides a rationale for conflation in digital advertising.
We characterize the revenue-maximizing information structure in the second price auction. The seller faces a classic economic trade-o¤: providing more information improves the efficiency of the allocation but also creates higher information rents for bidders. The information disclosure policy that maximizes the revenue of the seller is to fully reveal low values (where competition will be high) but to pool high values (where competition will be low). The size of the pool is determined by a critical quantile that is independent of the distribution of values and only dependent on the number of bidders. We discuss how this policy provides a rationale for conflation in digital advertising.
A firm raises capital from multiple investors to fund a project. The project succeeds only if the capital raised exceeds a stochastic threshold, and the firm offers payments contingent on success. We study the firm's optimal unique-implementation scheme, namely the scheme that guarantees the firm the maximum payoff. This scheme treats investors differently based on size. We show that if the distribution of the investment threshold is log-concave, larger investors receive higher net returns than smaller investors. Moreover, higher dispersion in investor size increases the firm's payoff. Our analysis highlights strategic risk as an important potential driver of inequality.