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The Full Surplus Extraction Theorem with Hidden Actions

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  • Ichiro Obara

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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Paper provided by UCLA Department of Economics in its series Levine's Bibliography with number 843644000000000137.

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Date of creation: 22 Jul 2007
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Handle: RePEc:cla:levrem:843644000000000137

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Citations

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Cited by:
  1. Vasiliki Skreta, 2008. "On the Informed Seller Problem: Optimal Information Disclosure," Working Papers, New York University, Leonard N. Stern School of Business, Department of Economics 08-10, New York University, Leonard N. Stern School of Business, Department of Economics.
  2. Krähmer, Daniel, 2012. "Auction design with endogenously correlated buyer types," Journal of Economic Theory, Elsevier, Elsevier, vol. 147(1), pages 118-141.
  3. Shi, Xianwen, 2012. "Optimal auctions with information acquisition," Games and Economic Behavior, Elsevier, Elsevier, vol. 74(2), pages 666-686.
  4. Michihiro Kandori & Ichiro Obara, 2006. "Efficiency in Repeated Games Revisited: The Role of Private Strategies," Econometrica, Econometric Society, Econometric Society, vol. 74(2), pages 499-519, 03.
  5. Dirk Bergemann & Xianwen Shi & Juuso Valimaki, 2008. "Information Acquisition in Interdependent Value Auctions," Working Papers, University of Toronto, Department of Economics tecipa-307, University of Toronto, Department of Economics.
  6. Pancs, Romans, 2013. "Sequential negotiations with costly information acquisition," Games and Economic Behavior, Elsevier, Elsevier, vol. 82(C), pages 522-543.
  7. Ichiro Obara, 2004. "Efficiency in Repeated Games Revisited: The Role of Private Strategies (with M. Kandori)," UCLA Economics Online Papers, UCLA Department of Economics 281, UCLA Department of Economics.
  8. Johannes Horner & Satoru Takahashi & Nicolas Vieille, 2013. "Truthful Equilibria in Dynamic Bayesian Games," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 1933, Cowles Foundation for Research in Economics, Yale University.
  9. Ichiro Obara, . "Approximate Implementability with Ex Post Budget Balance (Joint with D. Rahman)," UCLA Economics Online Papers, UCLA Department of Economics 399, UCLA Department of Economics.
  10. Bikhchandani, Sushil, 2010. "Information acquisition and full surplus extraction," Journal of Economic Theory, Elsevier, Elsevier, vol. 145(6), pages 2282-2308, November.
  11. Ichiro Obara & David Rahman, 2006. "Approximate Implementability with Ex Post Budget Balance," Levine's Bibliography 321307000000000280, UCLA Department of Economics.

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