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Mechanism Design with Private Communication

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  • Vianney Dequiedt
  • David Martimort

Abstract

We investigate the consequences of assuming "private" communication between the principal and each of his agents in an otherwise standard mechanism design setting.Doing so simplifies significantly optimal mechanisms and institutions. Moreover, it restores continuity of the principal's payoff and of the optimal mechanism with respect to the information structure while still maintaining the useful role of correlation to better extract the agents' information rent. We first prove a "Revelation Principle with private communication" that characterizes the set of allocations implementable under private communication by means of simple "non-manipulability constraints". We also demonstrate a "Taxation Principle" which helps drawing some links between private communication and limited commitment on the principal's side. Equipped with those tools, we derive optimal non-manipulable mechanisms in various environments (unrelated projects, auctions, team production).
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Suggested Citation

  • Vianney Dequiedt & David Martimort, 2007. "Mechanism Design with Private Communication," NajEcon Working Paper Reviews 843644000000000074, www.najecon.org.
  • Handle: RePEc:cla:najeco:843644000000000074
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    Cited by:

    1. Yu Chen, 2013. "Bilateral Mechanism Design: Practical Contracting in Multi-Agency," Caepr Working Papers 2013-003, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
    2. Fahad Khalil & Jacques Lawarrée & Troy J. Scott, 2015. "Private monitoring, collusion, and the timing of information," RAND Journal of Economics, RAND Corporation, vol. 46(4), pages 872-890, October.
    3. Julien Daubanes & Jean-Charles Rochet, 2013. "Activists versus Captured Regulators," CESifo Working Paper Series 4444, CESifo Group Munich.
    4. Yu Chen & Zhenhua Wu, 2012. "Delegation Principle for Multi-agency Games under Ex Post Equilibrium," Caepr Working Papers 2012-008, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
    5. repec:inu:caeprp:2012-008 is not listed on IDEAS

    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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