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Mechanism Design with Limited Commitment

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  • Laura Doval
  • Vasiliki Skreta

Abstract

We develop a tool akin to the revelation principle for dynamic mechanism-selection games in which the designer can only commit to short-term mechanisms. We identify a canonical class of mechanisms rich enough to replicate the outcomes of any equilibrium in a mechanism-selection game between an uninformed designer and a privately informed agent. A cornerstone of our methodology is the idea that a mechanism should encode not only the rules that determine the allocation, but also the information the designer obtains from the interaction with the agent. Therefore, how much the designer learns, which is the key tension in design with limited commitment, becomes an explicit part of the design. Our result simplifies the search for the designer-optimal outcome by reducing the agent's behavior to a series of participation, truthtelling, and Bayes' plausibility constraints the mechanisms must satisfy.

Suggested Citation

  • Laura Doval & Vasiliki Skreta, 2018. "Mechanism Design with Limited Commitment," Papers 1811.03579, arXiv.org, revised Dec 2021.
  • Handle: RePEc:arx:papers:1811.03579
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    Cited by:

    1. Seungjin Han & Siyang Xiong, 2022. "Common Agency with Non-Delegation or Imperfect Commitment," Department of Economics Working Papers 2022-05, McMaster University.
    2. Beccuti, Juan & Möller, Marc, 2021. "Screening by mode of trade," Games and Economic Behavior, Elsevier, vol. 129(C), pages 400-420.
    3. Laura Doval & Vasiliki Skreta, 2019. "Optimal mechanism for the sale of a durable good," Papers 1904.07456, arXiv.org, revised May 2021.
    4. Juan Beccuti, 2020. "On the Optimality of Price-posting in Rental Markets," Diskussionsschriften dp2007, Universitaet Bern, Departement Volkswirtschaft.
    5. Laura Doval & Vasiliki Skreta, 2018. "Constrained Information Design," Papers 1811.03588, arXiv.org, revised Aug 2022.
    6. Laura Doval & Alex Smolin, 2021. "Information Payoffs: An Interim Perspective," Papers 2109.03061, arXiv.org, revised Feb 2022.
    7. Maryam Saeedi & Ali Shourideh, 2020. "Optimal Rating Design," Papers 2008.09529, arXiv.org, revised Sep 2020.
    8. Tangerås, Thomas & Gick, Wolfgang, 2021. "Contracting with Endogenously Incomplete Commitment: Escape Clauses," Working Paper Series 1390, Research Institute of Industrial Economics.
    9. Doval, Laura & Skreta, Vasiliki, 2021. "Purchase history and product personalization," CEPR Discussion Papers 15969, C.E.P.R. Discussion Papers.

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