Template-Type: ReDIF-Paper 1.0
Title: Neo-Optimum: A Unifying Solution to the Informed-Principal Problem
Author-Name: Tymofiy Mylovanov
Author-Email: mylovanov@gmail.com
Author-Name: Thomas Tröger
Author-Email: troeger@uni-mannheim.de
Classification-JEL: D47, D82
Keywords: informed principal, mechanism design, signaling, neologism

Abstract: A mechanism proposal by a privately informed principal is a signal. The agents’ belief updating endogenizes their incentives in the
mechanism, implying that such design problems cannot be solved via
optimizing subject to incentive constraints. We propose a solution,
neo-optimum, that can be interpreted as principal-preferred perfect Bayesian equilibrium.
Its neologism-based definition allows an intuitive computation, as we demonstrate in several applications. 
Any Myerson neutral optimum is a neo-optimum, implying that a neooptimum exists generally. 
Neo-optimum unifies the other known solution approaches in the informed-principal literature.


Note: 
Length: 46
Creation-Date: 2025-02
Revision-Date: 2026-01
File-URL: https://www.crctr224.de/research/discussion-papers/archive/dp643v2
File-Format: application/pdf
Handle: RePEc:bon:boncrc:CRCTR224_2025_643_v2