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On the informed principal model with common values

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  • Anastasios Dosis

Abstract

In the informed principal model with common values, I provide conditions that allow for the characterization of the set of equilibria of the game in which the principal makes a take‐it‐or‐leave‐it offer of a mechanism to the agent. I further examine if and when restriction to direct revelation mechanisms is without loss of generality. Last, I provide clear guidelines for solving economic applications, such as insurance, procurement, security design, and bilateral trading, of the informed principal model. The results are compared with and shown to significantly differ from those obtained in Maskin and Tirole (1992).

Suggested Citation

  • Anastasios Dosis, 2022. "On the informed principal model with common values," RAND Journal of Economics, RAND Corporation, vol. 53(4), pages 792-825, December.
    • Handle: RePEc:bla:randje:v:53:y:2022:i:4:p:792-825
    DOI: 10.1111/1756-2171.12424
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    1. Myerson, Roger B, 1983. "Mechanism Design by an Informed Principal," Econometrica, Econometric Society, vol. 51(6), pages 1767-1797, November.
    2. Fleckinger, Pierre, 2007. "Informed principal and countervailing incentives," Economics Letters, Elsevier, vol. 94(2), pages 240-244, February.
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    4. Vasiliki Skreta, 2011. "On the informed seller problem: optimal information disclosure," Review of Economic Design, Springer;Society for Economic Design, vol. 15(1), pages 1-36, March.
    5. Beaudry, Paul, 1994. "Why an Informed Principal May Leave Rents to an Agent," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(4), pages 821-832, November.
    6. Eric Maskin, 1999. "Nash Equilibrium and Welfare Optimality," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 66(1), pages 23-38.
    7. David Martimort & Jean‐Christophe Poudou & Wilfried Sand‐Zantman, 2010. "Contracting For An Innovation Under Bilateral Asymmetric Information," Journal of Industrial Economics, Wiley Blackwell, vol. 58(2), pages 324-348, June.
    8. Koessler, Frédéric & Skreta, Vasiliki, 2016. "Informed seller with taste heterogeneity," Journal of Economic Theory, Elsevier, vol. 165(C), pages 456-471.
    9. Tymofiy Mylovanov & Thomas Tröger, 2014. "Mechanism Design by an Informed Principal: Private Values with Transferable Utility," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 81(4), pages 1668-1707.
    10. Severinov, Sergei, 2008. "An efficient solution to the informed principal problem," Journal of Economic Theory, Elsevier, vol. 141(1), pages 114-133, July.
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    12. Roger B. Myerson, 1981. "Optimal Auction Design," Mathematics of Operations Research, INFORMS, vol. 6(1), pages 58-73, February.
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    17. David Martimort & Wilfried Sand‐Zantman, 2006. "Signalling and the design of delegated management contracts for public utilities," RAND Journal of Economics, RAND Corporation, vol. 37(4), pages 763-782, December.
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    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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