A Note on Pareto Optimality in Differential Information Economies
A mechanism is posterior efficient in a differential information economy if at every outcome selected by the mechanism, the agents' expected utilities given this outcome cannot be Pareto improved by any feasible mechanism (in the revised economy). We show that a non-revealing (resp. completely revealing) mechanism is posterior efficient if and only if it is incentive interim efficient (resp. ex post efficient). The various efficiency concepts are illustrated in a simple adverse selection model.
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