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Informed principal problems in generalized private values environments

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Author Info

  • Mylovanov, Timofiy

    ()
    (Department of Economics, University of Pennsylvania)

  • Tröger, Thomas

    ()
    (Department of Economics, University of Mannheim)

Abstract

We show that a solution to the problem of mechanism selection by an informed principal exists in a large class of environments with “generalized private values”: the agents’ payoff functions are independent of the principal’s type. The solution is an extension of Maskin and Tirole’s (1990) strong unconstrained Pareto optimum. Our main condition for existence is that given any type profile the best possible outcome for the principal is the worst possible outcome for all agents. This condition is satisfied in most market environments. We also give an example for non-existence.

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Bibliographic Info

Article provided by Econometric Society in its journal Theoretical Economics.

Volume (Year): 7 (2012)
Issue (Month): 3 (September)
Pages:

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Handle: RePEc:the:publsh:787

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Web page: http://econtheory.org

Related research

Keywords: Informed principal; mechanism design; private values; strong unconstrained Pareto optimum;

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  1. DE CLIPPEL, Geoffroy & MINELLI, Enrico, . "Two-person bargaining with verifiable information," CORE Discussion Papers RP -1733, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Fleckinger, Pierre, 2007. "Informed principal and countervailing incentives," Economics Letters, Elsevier, vol. 94(2), pages 240-244, February.
  3. Mailath George J. & Okuno-Fujiwara Masahiro & Postlewaite Andrew, 1993. "Belief-Based Refinements in Signalling Games," Journal of Economic Theory, Elsevier, vol. 60(2), pages 241-276, August.
  4. Kosenok, Grigory & Severinov, Sergei, 2008. "Individually rational, budget-balanced mechanisms and allocation of surplus," Journal of Economic Theory, Elsevier, vol. 140(1), pages 126-161, May.
  5. Vasiliki Skreta, 2011. "On the informed seller problem: optimal information disclosure," Review of Economic Design, Springer, vol. 15(1), pages 1-36, March.
  6. Michela CELLA, 2007. "Informed principal with correlation," Departmental Working Papers 2007-11, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
  7. Grossman, Sanford J. & Perry, Motty, 1986. "Perfect sequential equilibrium," Journal of Economic Theory, Elsevier, vol. 39(1), pages 97-119, June.
  8. Hector Chade & Randolph Silvers, . "Informed Principal, Moral Hazard, and the Value of a More Informative Technology," Working Papers 2133302, Department of Economics, W. P. Carey School of Business, Arizona State University.
  9. Guesnerie, Roger & Laffont, Jean-Jacques, 1984. "A complete solution to a class of principal-agent problems with an application to the control of a self-managed firm," Journal of Public Economics, Elsevier, vol. 25(3), pages 329-369, December.
  10. Yilankaya, Okan, 1999. "A Note on the Seller's Optimal Mechanism in Bilateral Trade with Two-Sided Incomplete Information," Journal of Economic Theory, Elsevier, vol. 87(1), pages 267-271, July.
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