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The Full Surplus Extraction Theorem with Hidden Actions

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  • Obara Ichiro

    ()
    (UCLA)

Abstract

Consider a situation in which a principal commits to a mechanism first and then agents choose unobservable actions before their payoff-relevant types are realized. The agents' actions may affect not only their payoffs directly but also the distribution of their types as well. This paper extends Crémer and McLean's full surplus extraction theorem to such a setting. In this environment, it is shown that a principal may not succeed in extracting full surplus from agents when there are many actions to which the agents can deviate.However, it is also shown that a principal can extract full surplus generically given any approximately efficient (completely) mixed action profile. This is achieved by using a general mechanism where agents announce both their types and their realized actions. Therefore, with hidden actions, there is a big gap between exact full surplus extraction and approximate full surplus extraction.

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Bibliographic Info

Article provided by De Gruyter in its journal The B.E. Journal of Theoretical Economics.

Volume (Year): 8 (2008)
Issue (Month): 1 (March)
Pages: 1-28

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Handle: RePEc:bpj:bejtec:v:8:y:2008:i:1:n:8

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Citations

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Cited by:
  1. Ichiro Obara & David Rahman, 2006. "Approximate Implementability with Ex Post Budget Balance," Levine's Bibliography 321307000000000280, UCLA Department of Economics.
  2. Bikhchandani, Sushil, 2010. "Information acquisition and full surplus extraction," Journal of Economic Theory, Elsevier, vol. 145(6), pages 2282-2308, November.
  3. Johannes Horner & Satoru Takahashi & Nicolas Vieille, 2014. "Truthful Equilibria in Dynamic Bayesian Games," Levine's Working Paper Archive 786969000000000881, David K. Levine.
  4. Shi, Xianwen, 2012. "Optimal auctions with information acquisition," Games and Economic Behavior, Elsevier, vol. 74(2), pages 666-686.
  5. Ichiro Obara, 2004. "Efficiency in Repeated Games Revisited: The Role of Private Strategies (with M. Kandori)," UCLA Economics Online Papers 281, UCLA Department of Economics.
  6. Michihiro Kandori & Ichiro Obara, 2003. "Efficiency in Repeated Games Revisited: The Role of Private Strategies," CIRJE F-Series CIRJE-F-255, CIRJE, Faculty of Economics, University of Tokyo.
  7. Dirk Bergemann & Xianwen Shi & Juuso Valimaki, 2007. "Information Acquisition in Interdependent Value Auctions," Cowles Foundation Discussion Papers 1619, Cowles Foundation for Research in Economics, Yale University.
  8. Vasiliki Skreta, 2007. "On the Informed Seller Problem: Optimal Information Disclosure," Levine's Bibliography 843644000000000222, UCLA Department of Economics.
  9. Ichiro Obara, . "Approximate Implementability with Ex Post Budget Balance (Joint with D. Rahman)," UCLA Economics Online Papers 399, UCLA Department of Economics.
  10. Krähmer, Daniel, 2012. "Auction design with endogenously correlated buyer types," Journal of Economic Theory, Elsevier, vol. 147(1), pages 118-141.
  11. Pancs, Romans, 2013. "Sequential negotiations with costly information acquisition," Games and Economic Behavior, Elsevier, vol. 82(C), pages 522-543.

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