Optimal incentive compatible mechanism in a system with several active elements

Abstract

This paper considers the optimal mechanism design problems in an active system composed of a Principal and several active elements (AEs) with a shared incentive fund under the Principal’s incomplete awareness about the model parameters of the AEs. We find the optimal mechanisms that include the planning procedures, the penalty and incentive functions, as well as the incentive fund calculation and allocation procedures under which the AEs are interested in truth-telling and plan fulfillment.