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Extremal Incentive Compatible Transfers

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  • Nenad Kos
  • Matthias Messner

Abstract

We characterize the boundaries of the set of transfers implementing a given allocation rule without imposing any assumptions on the agent's type space or utility function besides quasi-linearity. In particular, we characterize the pointwise largest and the pointwise smallest transfer that implement a given allocation rule and are equal to zero at some prespeci ed type (extremal transfers). Exploiting the concept of extremal transfers allows us to obtain an exact characterization of the set of all implementable allocation rules (the set of transfers is non-empty) and the set of allocation rules satisfying Revenue Equivalence (the extremal transfers coincide). Furthermore, we show how the extremal transfers can be put to use in mechanism design problems where Revenue Equivalence does not hold. To this end we rst explore the role of extremal transfers when the agents with type dependent outside options are free to participate in the mechanism. Finally, we consider the question of budget balanced implementation. We show that an allocation rule can be implemented in an incentive compatible, individually rational and ex post budget balanced mechanism if and only if there exists an individually rational extremal transfer scheme that delivers an ex ante budget surplus.

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Bibliographic Info

Paper provided by IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University in its series Working Papers with number 359.

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Date of creation: 2010
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Handle: RePEc:igi:igierp:359

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Cited by:
  1. Juan Carlos Carbajal & Jeffrey C. Ely, 2012. "Mechanism Design Without Revenue Equivalence," Discussion Papers Series 458, School of Economics, University of Queensland, Australia.
  2. Mehmet Ekmekci & Nenad Kos & Rakesh Vohra, 2013. "Just Enough or All: Selling a Firm," Working Papers, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University 470, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  3. Alfredo Di Tillio & Nenad Kos & Matthias Messner, 2014. "The Design of Ambiguous Mechanisms," CESifo Working Paper Series 4949, CESifo Group Munich.
  4. Debasis Mishra & Anup Pramanik & Souvik Roy, 2013. "Implementation in multidimensional domains with ordinal restrictions," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers, Indian Statistical Institute, New Delhi, India 13-07, Indian Statistical Institute, New Delhi, India.
  5. Mishra, Debasis & Roy, Souvik, 2013. "Implementation in multidimensional dichotomous domains," Theoretical Economics, Econometric Society, Econometric Society, vol. 8(2), May.
  6. Berger André & Müller Rudolf & Naeemi Seyed Hossein, 2010. "Path-Monotonicity and Incentive Compatibility," Research Memorandum, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR) 035, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  7. Kos, Nenad & Messner, Matthias, 2013. "Incentive compatibility in non-quasilinear environments," Economics Letters, Elsevier, Elsevier, vol. 121(1), pages 12-14.
  8. Carbajal, Juan Carlos & Ely, Jeffrey C., 2013. "Mechanism design without revenue equivalence," Journal of Economic Theory, Elsevier, Elsevier, vol. 148(1), pages 104-133.

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