This paper studies a multiagent moral hazard setting. We resolve the tacit collusion problem that arises in our setting while employing a solution concept that makes less demanding behavioral assumptions than Nash. A simple mechanism is constructed that approximately implements the second-best solution in two rounds of iteratively removing strictly dominated strategies. Under our mechanism, the agents' best-reply correspondences are well defined, a small message space is employed, and the messages can be interpreted as divisional forecasts.
Arya, A., and Jonathan Glover. "A Simple Forecasting Mechanism for Moral Hazard Settings." Journal of Economic Theory 66, no. 2 (August 1995): 507-521.
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