Implementation with Securities
AbstractWe study mechanism design in a setting where agents know their types but are uncertain about the utility from any alternative. The final realized utility of each agent is observed by the principal and can be contracted upon. In such environments, the principal is not restricted to using only transfers but can employ security contracts which determine each agent's payoff as a function of their realized utility and the profile of announced types. We show that using security contracts instead of transfers expands the set of (dominant strategy) implementable social choice functions. Our main result is that in a finite type space, every social choice function that can be implemented using a security contract can also be implemented using a royalty contract. Royalty contracts are simpler and commonly used security contracts, in which agents initially pay a transfer and keep a fraction of their realized utility. We also identify a condition called acyclicity that is necessary and sufficient for implementation in these environments.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University of Toronto, Department of Economics in its series Working Papers with number tecipa-484.
Length: Unknown pages
Date of creation: 22 Apr 2013
Date of revision:
Contact details of provider:
Postal: 150 St. George Street, Toronto, Ontario
Phone: (416) 978-5283
dominant strategy implementation; acyclicity; security contracts; royalty contracts; cycle monotonicity;
Other versions of this item:
- Rahul Deb & Debasis Mishra, 2013. "Implementation with securities," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers 13-05, Indian Statistical Institute, New Delhi, India.
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- D47 - Microeconomics - - Market Structure and Pricing - - - Market Design
- D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-04-27 (All new papers)
- NEP-CTA-2013-04-27 (Contract Theory & Applications)
- NEP-MIC-2013-04-27 (Microeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Sushil Bikhchandani & Shurojit Chatterji & Ron Lavi & Ahuva Mu'alem & Noam Nisan & Arunava Sen, 2006. "Weak Monotonicity Characterizes Deterministic Dominant-Strategy Implementation," Econometrica, Econometric Society, vol. 74(4), pages 1109-1132, 07.
- Claudio Mezzetti, 2004. "Mechanism Design with Interdependent Valuations: Efficiency," Econometrica, Econometric Society, vol. 72(5), pages 1617-1626, 09.
- Donald J. Brown & Caterina Calsamiglia, 2005.
"The Nonparametric Approach to Applied Welfare Analysis,"
Cowles Foundation Discussion Papers
1507, Cowles Foundation for Research in Economics, Yale University.
- Donald Brown & Caterina Calsamiglia, 2007. "The Nonparametric Approach to Applied Welfare Analysis," Economic Theory, Springer, vol. 31(1), pages 183-188, April.
- Laffont, Jean-Jacques & Tirole, Jean, 1986.
"Using Cost Observation to Regulate Firms,"
Journal of Political Economy,
University of Chicago Press, vol. 94(3), pages 614-41, June.
- Debasis Mishra & Souvik Roy, 2011.
"Implementation in multidimensional dichotomous domains,"
Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers
11-15, Indian Statistical Institute, New Delhi, India.
- Mishra, Debasis & Roy, Souvik, 2013. "Implementation in multidimensional dichotomous domains," Theoretical Economics, Econometric Society, vol. 8(2), May.
- Riley, John G, 1988.
"Ex Post Information in Auctions,"
Review of Economic Studies,
Wiley Blackwell, vol. 55(3), pages 409-29, July.
- Juan Carlos Carbajal & Andrew McLennan & Rabee Tourky, 2012.
"Truthful Implementation and Preference Aggregation in Restricted Domains,"
Discussion Papers Series
459, School of Economics, University of Queensland, Australia.
- Carbajal, Juan Carlos & McLennan, Andrew & Tourky, Rabee, 2013. "Truthful implementation and preference aggregation in restricted domains," Journal of Economic Theory, Elsevier, vol. 148(3), pages 1074-1101.
- Yeon-Koo Che & Jinwoo Kim, 2009.
"Bidding With Securities: Comment,"
0809-10, Columbia University, Department of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (RePEc Maintainer).
If references are entirely missing, you can add them using this form.