Efficient Design with Interdependent Valuations
AbstractWe study efficient, Bayes-Nash incentive compatible mechanisms in a social choice setting that allows for informational and allocative externalities. We show that such mechanisms exist only if a congruence condition relating private and social rates of information substitution is satisfied. If signals are multidimensional, the congruence condition is determined by an integrability constraint, and it can hold only in non-generic cases such as the private value case or the symmetric case. If signals are one-dimensional, the congruence condition reduces to a monotonicity constraint and it can be generically satisfied. We apply the results to the study of multi-object auctions, and we discuss why such auctions cannot be reduced to one-dimensional models without loss of generality.
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Bibliographic InfoPaper provided by Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim in its series Sonderforschungsbereich 504 Publications with number 99-74.
Length: 23 pages
Date of creation: 13 Jul 1999
Date of revision:
Note: An earlier version (january 1998) of this paper was circulated as SFB 504 discussion paper 98-22. We wish to thank Olivier Compte, Eric Maskin, Paul Milgrom, Tim Van Zandt and Asher Wolinsky for very valuable remarks. Andy Postlewaite and two anonymous referees made comments that greatly improved the quality of the exposition. We also wish to thank seminar audiences at Basel, Berkeley, Boston, Frankfurt, Harvard, L.S.E., Mannheim, Michigan, MIT, Northwestern, Penn, Stanford, U.C.L., Wisconsin, and Yale for numerous comments. Financial Support from the Deutsche Forschungsgemeinschaft, SFB 504, at the University of Mannheim, is gratefully acknowledged.
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Other versions of this item:
- Philippe Jehiel & Benny Moldovanu, 1998. "Efficient Design with Interdependent Valuations," Discussion Papers 1244, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Jehiel, Phillipe & Moldovanu, Benny, 1998. "Efficient Design with Interdependent Valuations," Sonderforschungsbereich 504 Publications 98-22, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim.
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- Gresik, Thomas A., 1991. "Ex ante incentive efficient trading mechanisms without the private valuation restriction," Journal of Economic Theory, Elsevier, vol. 55(1), pages 41-63, October.
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