Abstract:

The Nash equilibrium implementing uniqueness of contract with nonverifiable agent types is researched in the true state. The firstbest contract with complete information and the secondbest contract with incomplete information are discussed based on a comprehensive review of the related literature. Based on Nash equilibrium in the signals space, the contract and the agent type is connected, then the uniqueness of Nash implementation on the firstbest contract and the secondbest contract is studied. As a result, the secondbest contract can be Nash implemented uniquely in nonverifiable agent types, but the firstbest contract cannot be done, which is offered as a test method for efficient incentive contract design.

Key words: principalagent; contracts; nonverifiability; Nash i mplementation