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An undominated mechanism for a class of informed principal problems with common values

Balkenborg, Dieter, Makris, Miltiadis (2015) An undominated mechanism for a class of informed principal problems with common values. Journal of Economic Theory, 157 . pp. 918-958. ISSN 0022-0531. (doi:10.1016/j.jet.2015.02.007) (KAR id:69609)

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https://doi.org/10.1016/j.jet.2015.02.007

Abstract

In a class of informed principal problems with common values, we define iteratively a particular allocation which we call the assured allocation. It is comparatively easy to calculate and straightforward to interpret. It always exists, is unique and continuous in the priors. It is undominated, i.e. efficient among the different types of the principal subject to the agent's interim participation constraint. It is a perfect Bayesian equilibrium of the three-stage game in Myerson [16] and Maskin and Tirole [14]. It dominates the RSW allocation as defined in Maskin and Tirole [14] and coincides with it when the latter is undominated. It is the unique neutral optimum as defined in Myerson [16] when there are only two types. When the assured allocation is separating, then it is a neutral optimum with three or more types. It is an equilibrium of a game of competition in a market with adverse selection.

Item Type: Article
DOI/Identification number: 10.1016/j.jet.2015.02.007
Uncontrolled keywords: Mechanism design, informed principal, common values, neutral optimum
Subjects: H Social Sciences
Divisions: Divisions > Division of Human and Social Sciences > School of Economics
Depositing User: Miltos Makris
Date Deposited: 17 Oct 2018 08:34 UTC
Last Modified: 16 Feb 2021 13:58 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/69609 (The current URI for this page, for reference purposes)
Makris, Miltiadis: https://orcid.org/0000-0003-1021-841X
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