Advanced Search
MyIDEAS: Login

Subgame-Perfect Implementation Under Information Perturbations

Contents:

Author Info

  • Philippe Aghion
  • Drew Fudenberg
  • Richard Holden
  • Takashi Kunimoto
  • Olivier Tercieux

Abstract

We consider the robustness of extensive form mechanisms to deviations from common knowledge about the state of nature, which we refer to as information perturbations. First, we show that even under arbitrarily small information perturbations the Moore-Repullo mechanism does not yield (even approximately) truthful revelation and that in addition the mechanism has sequential equilibria with undesirable outcomes. More generally, we prove that any extensive form mechanism is fragile in the sense that if a non-Maskin monotonic social objective can be implemented with this mechanism, then there are arbitrarily small information perturbations under which an undesirable sequential equilibrium also exists. Finally, we argue that outside options can help improve efficiency in asymmetric information environments, and that these options can be thought of as reflecting ownership of an asset. JEL Codes: C72, D23, D78, D82 Copyright 2012, Oxford University Press.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://hdl.handle.net/10.1093/qje/qjs026
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Oxford University Press in its journal The Quarterly Journal of Economics.

Volume (Year): 127 (2012)
Issue (Month): 4 ()
Pages: 1843-1881

as in new window
Handle: RePEc:oup:qjecon:v:127:y:2012:i:4:p:1843-1881

Contact details of provider:

Related research

Keywords:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Fudenberg, Drew & Kreps, David M. & Levine, David K., 1988. "On the robustness of equilibrium refinements," Journal of Economic Theory, Elsevier, vol. 44(2), pages 354-380, April.
  2. Bester, Helmut & Krähmer, Daniel, 2012. "Exit options in incomplete contracts with asymmetric information," Journal of Economic Theory, Elsevier, vol. 147(5), pages 1947-1968.
  3. Grossman, Sanford J & Hart, Oliver, 1985. "The Cost and Benefits of Ownership: A Theory of Vertical and Lateral Integration," CEPR Discussion Papers 70, C.E.P.R. Discussion Papers.
  4. Kim-Sau Chung & Jeffrey C. Ely, 2003. "Implementation with Near-Complete Information," Econometrica, Econometric Society, vol. 71(3), pages 857-871, 05.
  5. Matthew O. Jackson, 2001. "A crash course in implementation theory," Social Choice and Welfare, Springer, vol. 18(4), pages 655-708.
  6. Muller, Eitan & Satterthwaite, Mark A., 1977. "The equivalence of strong positive association and strategy-proofness," Journal of Economic Theory, Elsevier, vol. 14(2), pages 412-418, April.
  7. Che, Y.K. & Hausch, D.B., 1997. "Cooperative Investments and the Value of Contracting," Working papers 9714, Wisconsin Madison - Social Systems.
  8. Roberto Serrano & Antonio Cabrales, 2007. "Implementation in Adaptive Better-Response Dynamics," Working Papers 2007-10, Brown University, Department of Economics.
  9. Abreu, Dilip & Matsushima, Hitoshi, 1992. "Virtual Implementation in Iteratively Undominated Strategies: Complete Information," Econometrica, Econometric Society, vol. 60(5), pages 993-1008, September.
  10. Roger B. Myerson, 1982. "Two-Person Bargaining Problems with Incomplete Infonnation," Discussion Papers 527, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  11. Philippe Aghion & Drew Fudenberg & Richard T. Holden, 2009. "Subgame Perfect Implementation with Almost Perfect Information and the Hold-Up Problem," NBER Working Papers 15167, National Bureau of Economic Research, Inc.
  12. Hendon, Ebbe & Jacobsen, Hans Jorgen & Sloth, Birgitte, 1996. "The One-Shot-Deviation Principle for Sequential Rationality," Games and Economic Behavior, Elsevier, vol. 12(2), pages 274-282, February.
  13. Navin Kartik & Olivier Tercieux, 2009. "Implementation with Evidence: Complete Information," Economics Working Papers 0087, Institute for Advanced Study, School of Social Science, revised May 2009.
  14. Abreu, Dilip & Sen, Arunava, 1991. "Virtual Implementation in Nash Equilibrium," Econometrica, Econometric Society, vol. 59(4), pages 997-1021, July.
  15. Schmitz, Patrick W., 2002. "On the Interplay of Hidden Action and Hidden Information in Simple Bilateral Trading Problems," Journal of Economic Theory, Elsevier, vol. 103(2), pages 444-460, April.
  16. Johnson, Scott & Pratt, John W & Zeckhauser, Richard J, 1990. "Efficiency Despite Mutually Payoff-Relevant Private Information: The Finite Case," Econometrica, Econometric Society, vol. 58(4), pages 873-900, July.
  17. Matsushima, Hitoshi, 1988. "A new approach to the implementation problem," Journal of Economic Theory, Elsevier, vol. 45(1), pages 128-144, June.
  18. Eric Maskin, 1998. "Nash Equilibrium and Welfare Optimality," Harvard Institute of Economic Research Working Papers 1829, Harvard - Institute of Economic Research.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Kartik, Navin & Tercieux, Olivier & Holden, Richard, 2014. "Simple mechanisms and preferences for honesty," Games and Economic Behavior, Elsevier, vol. 83(C), pages 284-290.
  2. Goldlücke, Susanne & Schmitz, Patrick W, 2011. "Investments as Signals of Outside Options," CEPR Discussion Papers 8366, C.E.P.R. Discussion Papers.
  3. Philippe Aghion & Richard Holden, 2011. "Incomplete Contracts and the Theory of the Firm: What Have We Learned over the Past 25 Years?," Journal of Economic Perspectives, American Economic Association, vol. 25(2), pages 181-97, Spring.
  4. Thomas F. Hellmann & Veikko Thiele, 2012. "A Theory of the Firm based on Partner Displacement," NBER Working Papers 18495, National Bureau of Economic Research, Inc.
  5. Oliver D. Hart, 2011. "Noncontractible Investments and Reference Points," NBER Working Papers 16929, National Bureau of Economic Research, Inc.
  6. Bester, Helmut & Krähmer, Daniel, 2008. "Exit options in incomplete contracts with asymmetric information," Discussion Papers 2008/23, Free University Berlin, School of Business & Economics.
  7. Matthias Lang, 2014. "Communicating Subjective Evaluations," CESifo Working Paper Series 4830, CESifo Group Munich.
  8. Kyungmin Kim & Antonio Penta, 2012. "A Robustly Efficient Auction," Carlo Alberto Notebooks 248, Collegio Carlo Alberto.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:oup:qjecon:v:127:y:2012:i:4:p:1843-1881. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press) or (Christopher F. Baum).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.