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Individually Rational, Balanced-Budget Bayesian Mechanisms and the Informed Principal Problem

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  • Grigory Kosenokand Sergei Severinov

Abstract

We investigate the issue of implementation via individually rational ex-post budget-balanced Bayesian mechanisms. We demonstrate that all social choice rules that generate a nonnegative ex-ante surplus, including ex-post efficient ones, can generically be implemented via such mechanisms. The aggregate expected surplus in these mechanisms can be distributed in an arbitrary way. Also generically, any ex-post efficient social choice rule can be implemented in an informed principal framework, i.e. when the mechanism is offered by one of the informed parties. Only ex-post efficient social choice rules that allocate all surplus to the party designing the mechanism are both sequential equilibria and neutral optima, i.e. outcomes that can never be blocked

Suggested Citation

  • Grigory Kosenokand Sergei Severinov, 2004. "Individually Rational, Balanced-Budget Bayesian Mechanisms and the Informed Principal Problem," Econometric Society 2004 North American Summer Meetings 613, Econometric Society.
  • Handle: RePEc:ecm:nasm04:613
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    More about this item

    Keywords

    mechanism design; Bayesian implementation; surplus allocation; informed principal.;

    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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