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Neutral Optimum in Private-Values Settings

Author

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  • Tymofiy Mylovanov

  • Thomas Tröger

Abstract

We show that in informed-principal settings with generalized private values any neutral optimum (Myerson, 1983) is strongly neologism proof (Mylovanov and Tröger, 2012) and hence is a strong unconstrained Pareto optimum in the setting of Maskin and Tirole (1990). Thus, in any setting with a unique strongly neologism-proof solution this concept is equivalent to neutral optimum. We rely on the unifying concept of neo-optimum that we develop in the companion paper Mylovanov and Tröger (2026). The main step is to prove that any neo-optimum is strongly neologism-proof.

Suggested Citation

  • Tymofiy Mylovanov & Thomas Tröger, 2026. "Neutral Optimum in Private-Values Settings," CRC TR 224 Discussion Paper Series crctr224_2025_732, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2025_732
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    References listed on IDEAS

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    1. Myerson, Roger B, 1983. "Mechanism Design by an Informed Principal," Econometrica, Econometric Society, vol. 51(6), pages 1767-1797, November.
    2. Maskin, Eric & Tirole, Jean, 1990. "The Principal-Agent Relationship with an Informed Principal: The Case of Private Values," Econometrica, Econometric Society, vol. 58(2), pages 379-409, March.
    3. Yilankaya, Okan, 1999. "A Note on the Seller's Optimal Mechanism in Bilateral Trade with Two-Sided Incomplete Information," Journal of Economic Theory, Elsevier, vol. 87(1), pages 267-271, July.
    4. Frédéric Koessler & Vasiliki Skreta, 2023. "Informed Information Design," Journal of Political Economy, University of Chicago Press, vol. 131(11), pages 3186-3232.
    5. Guofu Tan, 1996. "Optimal Procurement Mechanisms for an Informed Buyer," Canadian Journal of Economics, Canadian Economics Association, vol. 29(3), pages 699-716, August.
    6. Severinov, Sergei, 2008. "An efficient solution to the informed principal problem," Journal of Economic Theory, Elsevier, vol. 141(1), pages 114-133, July.
    7. Farrell Joseph, 1993. "Meaning and Credibility in Cheap-Talk Games," Games and Economic Behavior, Elsevier, vol. 5(4), pages 514-531, October.
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    Keywords

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    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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