Mechanism design without revenue equivalence
AbstractWe study mechanism design problems in quasi-linear environments where the envelope theorem and revenue equivalence principle fail due to non-convex and non-differentiable valuations. We obtain a characterization of incentive compatibility based on the Mirrlees representation of the indirect utility and a monotonicity condition on the allocation rule, which pin down the range of possible payoffs as a function of the allocation rule. To illustrate our approach we derive the optimal selling mechanism in a buyer–seller situation where the buyer is loss-averse; we find a budget-balanced, efficient mechanism in a public goods location model; and we consider a principal–agent model with ex post non-contractible actions available to the agent.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Theory.
Volume (Year): 148 (2013)
Issue (Month): 1 ()
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Web page: http://www.elsevier.com/locate/inca/622869
Incentive compatibility; Revenue equivalence; Integral monotonicity; Revenue maximization; Loss aversion; Efficiency; Public goods; Non-contractible actions;
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
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