Contracting with imperfect commitment and the revelation principle: The single agent case

This paper extends the revelation principle to environments in which the me chanism designer cannot fully commit to the outcome induced by the mechanis m. We show that he may optimally use a direct mechanism under which truthfu l revelation is an optimal strategy fur the agent. In contrast with the con ventional revelation principle, however, the agent may not use this strateg y with probability one. Our results apply to contracting problems between a principal and a single agent. By reducing such problems to well-defined pr ogramming problems they provide a basic tool for studying imperfect commitm ent.