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Informational smallness and the scope for limiting information rents

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  • Gizatulina, Alia
  • Hellwig, Martin

Abstract

For an incomplete-information model of public-good provision with interim participation constraints, we show that efficient outcomes can be approximated, with approximately full surplus extraction, when there are many agents and each agent is informationally small. The result holds even if agents' payoffs cannot be unambiguously inferred from their beliefs. The contrary result of Neeman [Z. Neeman, The relevance of private information in mechanism design, J. Econ. Theory 117 (2004) 55-77] rests on an implicit uniformity requirement that is incompatible with the notion that agents are informationally small because there are many other agents who have information about them.

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  • Gizatulina, Alia & Hellwig, Martin, 2010. "Informational smallness and the scope for limiting information rents," Journal of Economic Theory, Elsevier, vol. 145(6), pages 2260-2281, November.
    • Handle: RePEc:eee:jetheo:v:145:y:2010:i:6:p:2260-2281
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    1. Richard McLean & Andrew Postlewaite, 2002. "Informational Size and Incentive Compatibility," Econometrica, Econometric Society, vol. 70(6), pages 2421-2453, November.
    2. Neeman, Zvika, 2004. "The relevance of private information in mechanism design," Journal of Economic Theory, Elsevier, vol. 117(1), pages 55-77, July.
    3. 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, January.
    4. George J. Mailath & Andrew Postlewaite, 1990. "Asymmetric Information Bargaining Problems with Many Agents," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 57(3), pages 351-367.
    5. Miller, Nolan H. & Pratt, John W. & Zeckhauser, Richard J. & Johnson, Scott, 2007. "Mechanism design with multidimensional, continuous types and interdependent valuations," Journal of Economic Theory, Elsevier, vol. 136(1), pages 476-496, September.
    6. Palfrey, Thomas R. & Srivastava, Sanjay, 1986. "Private information in large economies," Journal of Economic Theory, Elsevier, vol. 39(1), pages 34-58, June.
    7. Postlewaite, Andrew & Schmeidler, David, 1986. "Implementation in differential information economies," Journal of Economic Theory, Elsevier, vol. 39(1), pages 14-33, June.
    8. Robert, Jacques, 1991. "Continuity in auction design," Journal of Economic Theory, Elsevier, vol. 55(1), pages 169-179, October.
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    10. Gul, Faruk & Postlewaite, Andrew, 1992. "Asymptotic Efficiency in Large Exchange Economies with Asymmetric Information," Econometrica, Econometric Society, vol. 60(6), pages 1273-1292, November.
    11. Cremer, Jacques & McLean, Richard P, 1988. "Full Extraction of the Surplus in Bayesian and Dominant Strategy Auctions," Econometrica, Econometric Society, vol. 56(6), pages 1247-1257, November.
    12. McAfee, R Preston & Reny, Philip J, 1992. "Correlated Information and Mechanism Design," Econometrica, Econometric Society, vol. 60(2), pages 395-421, March.
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    Cited by:

    1. Dirk Bergemann & Stephen Morris, 2012. "Robust Mechanism Design: An Introduction," World Scientific Book Chapters, in: Robust Mechanism Design The Role of Private Information and Higher Order Beliefs, chapter 1, pages 1-48, World Scientific Publishing Co. Pte. Ltd..
    2. Guo, Huiyi, 2019. "Mechanism design with ambiguous transfers: An analysis in finite dimensional naive type spaces," Journal of Economic Theory, Elsevier, vol. 183(C), pages 76-105.
    3. Gizatulina, Alia & Hellwig, Martin, 2014. "Beliefs, payoffs, information: On the robustness of the BDP property in models with endogenous beliefs," Journal of Mathematical Economics, Elsevier, vol. 51(C), pages 136-153.

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    More about this item

    Keywords

    Surplus extraction Mechanism design BDP Informational smallness Correlated information Universal type space Public goods;

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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