IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/90804.html
   My bibliography  Save this paper

Generalizing mechanism design theory to a case where agents' types are adjustable

Author

Listed:
  • Wu, Haoyang

Abstract

In mechanism design theory, a designer would like to implement a desired social choice function which specifies her favorite outcome for each possible profile of all agents' types. Since the designer does not know each agent's private type, what she can do is to construct a mechanism and choose an outcome after observing a profile of agents' strategies. There is a dilemma in the sense that even if the designer is not satisfied with some outcome, she has to obey the mechanism designed by herself and announce this outcome. In this paper, we generalize the mechanism design theory to a case where the designer can take some action to actively adjust agents' private types, and yield a more favorite outcome. After defining a series of notions such as adjustable types, optimal adjustment cost and profitably Bayesian implementability, we propose that the traditional notion of Bayesian incentive compatibility does not hold in this generalized case. Finally, we construct a model to illustrate that the auctioneer can obtain an expected profit greater than what she obtains in the traditional optimal auction.

Suggested Citation

  • Wu, Haoyang, 2018. "Generalizing mechanism design theory to a case where agents' types are adjustable," MPRA Paper 90804, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:90804
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/90804/1/MPRA_paper_90804.pdf
    File Function: original version
    Download Restriction: no
    File URL: https://mpra.ub.uni-muenchen.de/90941/1/MPRA_paper_90941.pdf
    File Function: revised version
    Download Restriction: no
    File URL: https://mpra.ub.uni-muenchen.de/90981/1/MPRA_paper_90981.pdf
    File Function: revised version
    Download Restriction: no
    File URL: https://mpra.ub.uni-muenchen.de/91304/1/MPRA_paper_91304.pdf
    File Function: revised version
    Download Restriction: no
    File URL: https://mpra.ub.uni-muenchen.de/91743/1/MPRA_paper_91743.pdf
    File Function: revised version
    Download Restriction: no
    File URL: https://mpra.ub.uni-muenchen.de/94242/1/MPRA_paper_94242.pdf
    File Function: revised version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Roger B. Myerson, 1981. "Optimal Auction Design," Mathematics of Operations Research, INFORMS, vol. 6(1), pages 58-73, February.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Arve, Malin & Zwart, Gijsbert, 2023. "Optimal procurement and investment in new technologies under uncertainty," Journal of Economic Dynamics and Control, Elsevier, vol. 147(C).
    2. Yuya Wakabayashi & Ryosuke Sakai & Shigehiro Serizawa, 2022. "A Characterization of the Minimum Price Walrasian Rule with Reserve Prices for an Arbitrary Number of Agents and Objects," ISER Discussion Paper 1161, Institute of Social and Economic Research, Osaka University.
    3. Laurent Lamy, 2013. "“Upping the ante”: how to design efficient auctions with entry?," RAND Journal of Economics, RAND Corporation, vol. 44(2), pages 194-214, June.
    4. Yeon-Koo Che & Ian Gale, 1994. "Auctions with budget-constrained buyers: a nonequivalence result," Working Papers (Old Series) 9402, Federal Reserve Bank of Cleveland.
    5. Bogetoft, Peter & Nielsen, Kurt, 2003. "Yardstick Based Procurement Design In Natural Resource Management," 2003 Annual Meeting, August 16-22, 2003, Durban, South Africa 25910, International Association of Agricultural Economists.
    6. Shunda, Nicholas, 2009. "Auctions with a buy price: The case of reference-dependent preferences," Games and Economic Behavior, Elsevier, vol. 67(2), pages 645-664, November.
    7. Stefano Galavotti, 2014. "Reducing Inefficiency in Public Good Provision Through Linking," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 16(3), pages 427-466, June.
    8. Stephen Leider & William S. Lovejoy, 2016. "Bargaining in Supply Chains," Management Science, INFORMS, vol. 62(10), pages 3039-3058, October.
    9. Schmitz, Patrick W., 2003. "On second-price auctions and imperfect competition," Journal of Mathematical Economics, Elsevier, vol. 39(8), pages 901-909, November.
    10. Pablo Guillen & Róbert F. Veszteg, 2021. "Strategy-proofness in experimental matching markets," Experimental Economics, Springer;Economic Science Association, vol. 24(2), pages 650-668, June.
    11. Anil Aswani & Zuo-Jun Max Shen & Auyon Siddiq, 2019. "Data-Driven Incentive Design in the Medicare Shared Savings Program," Operations Research, INFORMS, vol. 67(4), pages 1002-1026, July.
    12. Frank Kelly & Peter Key & Neil Walton, 2016. "Efficient Advert Assignment," Operations Research, INFORMS, vol. 64(4), pages 822-837, August.
    13. Renato Gomes & Alessandro Pavan, 2013. "Cross-Subsidization and Matching Design," Discussion Papers 1559, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    14. ,, 2011. "Manipulative auction design," Theoretical Economics, Econometric Society, vol. 6(2), May.
    15. Santiago R. Balseiro & Ozan Candogan & Huseyin Gurkan, 2021. "Multistage Intermediation in Display Advertising," Manufacturing & Service Operations Management, INFORMS, vol. 23(3), pages 714-730, May.
    16. Schmitz, Patrick W., 2002. "On Monopolistic Licensing Strategies under Asymmetric Information," Journal of Economic Theory, Elsevier, vol. 106(1), pages 177-189, September.
    17. Yuen Leng Chow & Isa E. Hafalir & Abdullah Yavas, 2015. "Auction versus Negotiated Sale: Evidence from Real Estate Sales," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 43(2), pages 432-470, June.
    18. Horn, Henrik & Tangerås, Thomas, 2016. "Economics and Politics of International Investment Agreements," Working Paper Series 1140, Research Institute of Industrial Economics.
    19. Charles Z. Zheng, 2014. "Existence of Monotone Equilibria in First-Price Auctions with Resale," University of Western Ontario, Economic Policy Research Institute Working Papers 20141, University of Western Ontario, Economic Policy Research Institute.
    20. Lamy, Laurent, 2012. "The econometrics of auctions with asymmetric anonymous bidders," Journal of Econometrics, Elsevier, vol. 167(1), pages 113-132.

    More about this item

    Keywords

    Mechanism design; Optimal auction; Bayesian Nash implementation.;
    All these keywords.

    JEL classification:

    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:90804. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.