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Implementation under ambiguity

Author

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  • de Castro, Luciano I.
  • Liu, Zhiwei
  • Yannelis, Nicholas C.

Abstract

We introduce the idea of implementation under ambiguity. In particular, we study maximin efficient notions for an ambiguous asymmetric information economy (i.e., economies where agents' preferences are maximin à laWald, 1950). The interest on the maximin preferences lies in the fact that maximin efficient allocations are always incentive compatible (de Castro and Yannelis, 2009), a result which is false with Bayesian preferences. A noncooperative notion called maximin equilibrium is introduced which provides a noncooperative foundation for individually rational and maximin efficient notions. Specifically, we show that given any arbitrary individually rational and ex-ante maximin efficient allocation, there is a direct revelation mechanism that yields the efficient allocation as its unique maximin equilibrium outcome. Thus, an incentive compatible, individually rational and efficient outcome can be reached by means of noncooperative behavior under ambiguity.

Suggested Citation

  • de Castro, Luciano I. & Liu, Zhiwei & Yannelis, Nicholas C., 2017. "Implementation under ambiguity," Games and Economic Behavior, Elsevier, vol. 101(C), pages 20-33.
  • Handle: RePEc:eee:gamebe:v:101:y:2017:i:c:p:20-33
    DOI: 10.1016/j.geb.2015.10.010
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    References listed on IDEAS

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    1. repec:eee:gamebe:v:115:y:2019:i:c:p:436-458 is not listed on IDEAS
    2. repec:eee:jetheo:v:177:y:2018:i:c:p:678-707 is not listed on IDEAS
    3. repec:eee:jetheo:v:183:y:2019:i:c:p:76-105 is not listed on IDEAS

    More about this item

    Keywords

    Maximin preferences; Maximin efficient allocations; Maximin equilibrium; Implementation;

    JEL classification:

    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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