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Intermediated implementation

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  • Li, Anqi
  • Xing, Yiqing

Abstract

We examine problems of “intermediated implementation,” in which a single principal can only regulate limited aspects of the consumption bundles traded between intermediaries and agents with hidden characteristics. An example is sales, in which retailers offer menus of consumption bundles to customers with hidden tastes, whereas a manufacturer with a potentially different goal from retailers’ is limited to regulating sold consumption goods but not retail prices by legal barriers. We study how the principal can implement through intermediaries any social choice rule that is incentive compatible and individually rational for agents. We demonstrate the effectiveness of per-unit fee schedules and distribution regulations, which hinges on whether intermediaries have private or interdependent values. We give further applications to healthcare regulation and income redistribution.

Suggested Citation

  • Li, Anqi & Xing, Yiqing, 2020. "Intermediated implementation," European Economic Review, Elsevier, vol. 123(C).
  • Handle: RePEc:eee:eecrev:v:123:y:2020:i:c:s0014292120300192
    DOI: 10.1016/j.euroecorev.2020.103387
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    More about this item

    Keywords

    Implementation; vertical structure; adverse selection; monopolistic screening;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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