18 - 2 - Hidden Action and Hidden Information

Mechanism Design

"When you think about designing mechanisms in effect what we are doing, we are designing incentive structures so that we get the sort of outcomes we want. Now to get those outcomes often what we're trying to do is we're trying to induce people into taking the right kinds of effort. So, for example, if I'm an employer, what I'd like to do is I'd like to write a contract so that people actually put forth a lot of effort in their work as opposed to slacking off. Alternatively, if I'm auctioning something off, what I'd like people to do is reveal their information. I like them to reveal how much they value something. So, another feature that we want when we construct mechanisms is revelation of information. So, when I think about mechanism design, two of the core problems are dealing with these hidden actions and dealing with hidden information. So, how do we write mechanisms or incentive structures that overcome those two problems? ..." - Transcript from Scott Page Coursera

Resource Datasbase

Scott Page Model Thinking MOOC Course