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Dynamic Competing Mechanisms

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  • Sambuddha Ghosh
  • Seungjin Han

Abstract

Competing mechanism games involve multiple principals contracting with one or more agents. This paper extends the static model of Epstein and Peters (1999) to the repeated setting, allowing agents' types to evolve over time according to a Markov process. Actions are perfectly monitored, but types and messages are private information. Perhaps surprisingly, when discounting is low the dynamic game is more tractable in the following senses. First, each principal's minmax value relative to arbitrarily general mechanisms equals that relative to simpler mechanisms, often direct mechanisms. This contrasts with one-shot games, where the minmax cannot be explicitly computed because it is not expresssible in terms of simple mechanisms. Second, the above result allows equilibrium payoffs to be expressed in terms of primitives of the model. From the applied perspective, this paper provides a sufficient class of simple mechanisms to which one can restrict attention without loss of generality.

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Bibliographic Info

Paper provided by McMaster University in its series Department of Economics Working Papers with number 2012-03.

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Length: 43 pages
Date of creation: Apr 2012
Date of revision:
Handle: RePEc:mcm:deptwp:2012-03

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Keywords: dynamic competing mechanisms; minmax values; direct mechanisms; folk theorem; robust equilibria;

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References

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  1. Giacomo Calzolari & Alessandro Pavan, 2007. "Sequential Contracting with Multiple Principals," Discussion Papers 1457, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. Abreu, D. & Matsushima, H., 1991. "Virtual Implementation in Iteratively Undominated Strategies: Incomplete Information," Working Papers e-91-2, Hoover Institution, Stanford University.
  3. Attar, Andrea & Mariotti, Thomas & Salanié, François, 2009. "Non-Exclusive Competition in the Market for Lemons," IDEI Working Papers 558, Institut d'Économie Industrielle (IDEI), Toulouse.
  4. Jihong Lee & Hamid Sabourian, 2011. "Efficient Repeated Implementation," Econometrica, Econometric Society, vol. 79(6), pages 1967-1994, November.
  5. Takuro Yamashita, 2010. "Mechanism Games With Multiple Principals and Three or More Agents," Econometrica, Econometric Society, vol. 78(2), pages 791-801, 03.
  6. Dirk Bergemann & Stephen Morris, 2005. "Robust Mechanism Design," NajEcon Working Paper Reviews 666156000000000593, www.najecon.org.
  7. Alessandro Pavan & Giacomo Calzolari, 2008. "Truthful Revelation Mechanisms for Simultaneous Common Agency Games," Carlo Alberto Notebooks 85, Collegio Carlo Alberto.
  8. Matsushima, Hitoshi, 1988. "A new approach to the implementation problem," Journal of Economic Theory, Elsevier, vol. 45(1), pages 128-144, June.
  9. Dirk & Juuso Valimaki, 1998. "Dynamic Common Agency," Cowles Foundation Discussion Papers 1206, Cowles Foundation for Research in Economics, Yale University.
  10. David Martimort & Lars Stole, 2002. "The Revelation and Delegation Principles in Common Agency Games," Econometrica, Econometric Society, vol. 70(4), pages 1659-1673, July.
  11. Dilip Abreu & Prajit K Dutta & Lones Smith, 1997. "Folk Theorems for Repeated Games: A NEU Condition," Levine's Working Paper Archive 633, David K. Levine.
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