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On the genericity of full surplus extraction in mechanism design

  • Barelli, Paulo
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    Heifetz and Neeman [A. Heifetz, Z. Neeman, On the generic (im)possibility of full surplus extraction, Econometrica 74 (2006) 213-233], using convex combinations of models, showed that full surplus extraction (FSE) in mechanism design is generically impossible, contrary to the seminal work of Cremer and McLean [J. Cremer, R. McLean, Full extraction of the surplus in Bayesian and dominant strategy auctions, Econometrica 53 (1988) 345-361]. Since Cremer and McLean did not allow convex combinations of models, the two results are not comparable. We show that FSE is generically impossible when convex combinations of models are not allowed, provided that we do not hold fixed the cardinality of models.

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    Article provided by Elsevier in its journal Journal of Economic Theory.

    Volume (Year): 144 (2009)
    Issue (Month): 3 (May)
    Pages: 1320-1332

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    Handle: RePEc:eee:jetheo:v:144:y:2009:i:3:p:1320-1332
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622869

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    1. Eddie Dekel & Drew Fudenberg & Stephen Morris, 2005. "Topologies on Types," Levine's Bibliography 784828000000000061, UCLA Department of Economics.
    2. Neeman, Z., 1998. "The Relevance of Private Infromation in Mechanism Design," Papers 93, Boston University - Department of Economics.
    3. Rubinstein, Ariel, 1989. "The Electronic Mail Game: Strategic Behavior under "Almost Common Knowledge."," American Economic Review, American Economic Association, vol. 79(3), pages 385-91, June.
    4. Aviad Heifetz & Zvika Neeman, 2006. "On the Generic (Im)Possibility of Full Surplus Extraction in Mechanism Design," Econometrica, Econometric Society, vol. 74(1), pages 213-233, 01.
    5. Robert, Jacques, 1991. "Continuity in auction design," Journal of Economic Theory, Elsevier, vol. 55(1), pages 169-179, October.
    6. Cremer, Jacques & McLean, Richard P, 1988. "Full Extraction of the Surplus in Bayesian and Dominant Strategy Auctions," Econometrica, Econometric Society, vol. 56(6), pages 1247-57, November.
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