I am a postdoctoral researcher at the School of Economics and Finance, Queen Mary University of London. My interests are in microeconomic theory, with a focus on mechanism design and dynamic games. |  Contact Information: Queen Mary University of London Mile End Road London E14NS d.bhaskar@qmul.ac.uk |
Research
Working Papers
This paper studies the use of endogenous monitoring of agent behaviour as a screening device in long-term relationships with adverse selection and limited commitment. While monitoring to prevent moral hazard is well understood, its role in the presence of adverse selection has been relatively unexplored. For the purposes of screening, monitoring is used in exactly the opposite way to its more traditionally understood role. Moreover this gives rise to a tension between the two roles, leading to a distortion of the former. At the beginning of the relationship, sufficiently infrequent monitoring is used to incentivise low types of agents to shirk, despite the chance of being caught and fired. After high types have been identified, monitoring is used both to incentivise effort from high types (the traditional role), and to provide off-path (dis)incentives for low types looking to build a reputation. This results in a key trade-off: providing cost-efficient incentives to high types versus screening low types faster. The optimal contract involves inefficiently high monitoring after high types are identified to facilitate faster screening. Monitoring stochastically declines over the course of the relationship.
Dynamic Inspection and the Value of Information.
This paper studies a dynamic inspection game between a principal and agent with hidden type. The principal employs an agent with private informatiom about his type, and strictly prefers his outside option to employing a low type. Every period that the agent is employed, the principal can perfectly monitor the agent's actions at a cost. The agent can either exert effort or shirk. The high type's preferences are aligned with the principal so he strictly prefers to exert effort. The low type finds it costly to exert effort, but may find it worthwhile to do so in order to deceive the principal. I show that the game generically has a unique equilibrium, which is a war of attrition between the principal and the low type. The main result finds that monitoring has value for the principal if and only if he is sufficiently pessimistic enough about the agent's type. Monitoring decreases as the agent's reputation grows. Eventually, either the low type is caught and fired, or the principal trusts the agent enough that he stops monitoring forever.
In several common allocation problems, transfers are unavailable, but incentives are partially aligned because the allocation to one player entails positive, though imperfect, externalities to the other. We study the extent to which a designer can exploit this alignment when allocating a budget between two players. We identify a natural mechanism, the infinite hierarchical mechanism, which partitions the type space into a countably infinite set of intervals and allocates the budget to the player in the highest interval. If both players are in the same interval, it divides the budget evenly. An appealing feature is that a designer can implement this mechanism without commitment power, and the mechanism is optimal among those implementable without commitment. Our main result shows that this mechanism remains optimal with full commitment power if the hazard rate of the type distribution is monotone, and the density is single peaked.