Neutral Optima in Informed Principal Problems with Common Values
AbstractIn a class of informed principal problems with common values often used in applications we de…fine a particular mechanism which we call the assured allocation. It is always undominated, i.e. efficient among the different types of the principal. We show it is a perfect Bayesian equilibrium allocation of the three-stage game studied in Maskin and Tirole (1992) that coincides with the Rothschild-Stiglitz- Wilson allocation when the latter is undominated. Under familiar conditions on hazard rates we show that the assured allocation is a neutral optimum in the sense of Myerson (1983).
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Bibliographic InfoPaper provided by Exeter University, Department of Economics in its series Discussion Papers with number 0902.
Date of creation: 2009
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Neutral optimum; mechanism design; informed principal;
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