Adverse Selection, Heterogeneous Beliefs, and Evolutionary Learning

Abstract We relax the common assumption of homogeneous beliefs in principal-agent relationships with adverse selection. Principals are competitors product market and write contracts also on base an expected aggregate. The model is a version cobweb model. In evolutionary learning set-up, which imitative, principals can have different about distribution agents’ types population. resulting nonlinear dynamic system studied. Convergence to uniform belief depends relative size bias beliefs.