Dominant incentive strategies for hierarchical systems with incomplete information structure

This paper considers the incentive design problem in two-level hierarchical systems with multiple followers whose behavior pattern is uncertain to the leader. We first propose the concept of dominant incentive strategy, which realizes the leader´s most desirable outcome in spite of the presence of uncertainty, and then derive its existence conditions and design methods. The theoretical results are applied to designing coordinating mechanisms for a duopoly market under incomplete information