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On the genericity of full surplus extraction in mechanism design

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  • Barelli, Paulo
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    Abstract

    Heifetz and Neeman [A. Heifetz, Z. Neeman, On the generic (im)possibility of full surplus extraction, Econometrica 74 (2006) 213-233], using convex combinations of models, showed that full surplus extraction (FSE) in mechanism design is generically impossible, contrary to the seminal work of Cremer and McLean [J. Cremer, R. McLean, Full extraction of the surplus in Bayesian and dominant strategy auctions, Econometrica 53 (1988) 345-361]. Since Cremer and McLean did not allow convex combinations of models, the two results are not comparable. We show that FSE is generically impossible when convex combinations of models are not allowed, provided that we do not hold fixed the cardinality of models.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Economic Theory.

    Volume (Year): 144 (2009)
    Issue (Month): 3 (May)
    Pages: 1320-1332

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    Handle: RePEc:eee:jetheo:v:144:y:2009:i:3:p:1320-1332

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    Web page: http://www.elsevier.com/locate/inca/622869

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    Keywords: Full surplus extraction Mechanism design Universal beliefs space Common knowledge;

    References

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    1. Neeman, Z., 1998. "The Relevance of Private Infromation in Mechanism Design," Papers 93, Boston University - Department of Economics.
    2. Cremer, Jacques & McLean, Richard P, 1988. "Full Extraction of the Surplus in Bayesian and Dominant Strategy Auctions," Econometrica, Econometric Society, vol. 56(6), pages 1247-57, November.
    3. Robert, Jacques, 1991. "Continuity in auction design," Journal of Economic Theory, Elsevier, vol. 55(1), pages 169-179, October.
    4. Aviad Heifetz & Zvika Neeman, 2004. "On the Generic (Im)possibility of Full Surplus Extraction in Mechanism Design," Discussion Paper Series dp350, The Center for the Study of Rationality, Hebrew University, Jerusalem.
    5. Rubinstein, Ariel, 1989. "The Electronic Mail Game: Strategic Behavior under "Almost Common Knowledge."," American Economic Review, American Economic Association, vol. 79(3), pages 385-91, June.
    6. Dekel, Eddie & Fudenberg, Drew & Morris, Stephen, 2006. "Topologies on types," Theoretical Economics, Econometric Society, vol. 1(3), pages 275-309, September.
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    Cited by:
    1. Krähmer, Daniel, 2012. "Auction design with endogenously correlated buyer types," Journal of Economic Theory, Elsevier, vol. 147(1), pages 118-141.
    2. Alexey Kushnir, 2013. "On the equivalence between Bayesian and dominant strategy implementation: the case of correlated types," ECON - Working Papers 129, Department of Economics - University of Zurich.
    3. Chen, Yi-Chun & Xiong, Siyang, 2011. "The genericity of beliefs-determine-preferences models revisited," Journal of Economic Theory, Elsevier, vol. 146(2), pages 751-761, March.

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