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Efficient Design with Multidimensional, Continuous Types, and Interdependent Valuations

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  • Johnson, Scott
  • Miller, Nolan

    (Harvard U)

  • Pratt, John W.

    (Harvard U)

  • Zeckhauser, Richard

    (Harvard U)

Abstract

We consider mechanism design in social choice problems in which agents’ types are continuous, multidimensional, and mutually payoff-relevant, and there are three or more agents. If the center receives a signal that is stochastically related to the agents’ types and direct returns are bounded, then for any decision rule there is a balanced transfer function that ensures that any strategy that is not arbitrarily close to truthful is dominated by one that is. If direct returns are continuous as well, truthful revelation becomes an -dominant strategy, all Bayes-Nash equilibrium strategies are nearly truthful, and at least one such strategy exists. If the center’s information is not informative but agents’ types are stochastically related, then there exist balanced transfers under which truthful revelation is a Bayesian -equilibrium, again for any decision rule. Analogous results hold for decentralized decision problems when agents also take mutually payoff-relevant actions in advance of any action by the center.

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Bibliographic Info

Paper provided by Harvard University, John F. Kennedy School of Government in its series Working Paper Series with number rwp03-020.

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Date of creation: Mar 2003
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Handle: RePEc:ecl:harjfk:rwp03-020

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References

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  1. Philippe Jehiel & Benny Moldovanu, 1998. "Efficient Design with Interdependent Valuations," Discussion Papers 1244, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. Partha Dasgupta & Eric Maskin, 2000. "Efficient Auctions," The Quarterly Journal of Economics, MIT Press, vol. 115(2), pages 341-388, May.
  3. Richard McLean & Andrew Postlewaite, 2004. "Informational Size and Efficient Auctions," Review of Economic Studies, Oxford University Press, vol. 71(3), pages 809-827.
  4. d'ASPREMONT, Claude & GERARD-VARET, Louis-André, . "Linear inequality methods to enforce partnerships under uncertainty: an overview," CORE Discussion Papers RP -1354, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. 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.
  6. Cremer, Jacques & McLean, Richard P, 1985. "Optimal Selling Strategies under Uncertainty for a Discriminating Monopolist When Demands Are Interdependent," Econometrica, Econometric Society, vol. 53(2), pages 345-61, March.
  7. Aoyagi, Masaki, 1998. "Correlated Types and Bayesian Incentive Compatible Mechanisms with Budget Balance," Journal of Economic Theory, Elsevier, vol. 79(1), pages 142-151, March.
  8. d'Aspremont, Claude & Gerard-Varet, Louis-Andre, 1979. "Incentives and incomplete information," Journal of Public Economics, Elsevier, vol. 11(1), pages 25-45, February.
  9. 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.
  10. Neeman, Zvika, 2004. "The relevance of private information in mechanism design," Journal of Economic Theory, Elsevier, vol. 117(1), pages 55-77, July.
  11. Green, Jerry & Laffont, Jean-Jacques, 1977. "Characterization of Satisfactory Mechanisms for the Revelation of Preferences for Public Goods," Econometrica, Econometric Society, vol. 45(2), pages 427-38, March.
  12. Groves, Theodore, 1973. "Incentives in Teams," Econometrica, Econometric Society, vol. 41(4), pages 617-31, July.
  13. repec:wop:humbsf:2000-72 is not listed on IDEAS
  14. Matsushima, Hitoshi, 1991. "Incentive compatible mechanisms with full transferability," Journal of Economic Theory, Elsevier, vol. 54(1), pages 198-203, June.
  15. d'ASPREMONT, Claude & CREMER, Jacques & GERARD-VARET, Louis-André, . "Incentives and the existence of Pareto-optimal revelation mechanisms," CORE Discussion Papers RP -902, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  16. McAfee, R Preston & Reny, Philip J, 1992. "Correlated Information and Mechanism Design," Econometrica, Econometric Society, vol. 60(2), pages 395-421, March.
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