IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

The Design of Ambiguous Mechanisms

  • Alfredo Di Tillio
  • Nenad Kos
  • Matthias Messner

This paper considers the optimal mechanism design problem of an expected revenue maximizing principal who wants to sell a single unit of a good to an agent who is ambiguity averse in the sense of Gilboa and Schmeidler (1989). We show that the optimal static mechanism is an ambiguous mechanism. An ambiguous mechanism specifies a message space and a set of outcome functions. After showing that (a version of) the Revelation Principle holds in our environment, we give an exact characterization of the (smallest) optimal ambiguous mechanism. If the type set is composed of N (finite) types, then the (smallest) optimal ambiguous mechanism contains N - 1 outcome functions. We show that the share of the surplus that the designer can extract from the agent increases as the type set becomes larger and the probability of each single type decreases. In the limiting case where the agent’s type is drawn from a non-atomic distribution on an interval, the optimal ambiguous mechanism extracts all the rent from the agent.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: ftp://ftp.igier.unibocconi.it/wp/2012/446.pdf
Download Restriction: no

Paper provided by IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University in its series Working Papers with number 446.

as
in new window

Length:
Date of creation: 2012
Date of revision:
Handle: RePEc:igi:igierp:446
Contact details of provider: Postal: via Rontgen, 1 - 20136 Milano (Italy)
Phone: 0039-02-58363301
Fax: 0039-02-58363302
Web page: http://www.igier.unibocconi.it/

Order Information: Web: http://www.igier.unibocconi.it/en/papers/index.htm Email:


References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Sujoy Mukerji & Peter Klibanoff, 2002. "A Smooth Model of Decision,Making Under Ambiguity," Economics Series Working Papers 113, University of Oxford, Department of Economics.
  2. Subir Bose & Arup Daripa, 2008. "A Dynamic Mechanism and Surplus Extraction Under Ambiguity," Discussion Papers in Economics 08/24, Department of Economics, University of Leicester.
  3. Turocy, Theodore L., 2008. "Auction choice for ambiguity-averse sellers facing strategic uncertainty," Games and Economic Behavior, Elsevier, vol. 62(1), pages 155-179, January.
  4. Kos, Nenad & Messner, Matthias, 2013. "Extremal incentive compatible transfers," Journal of Economic Theory, Elsevier, vol. 148(1), pages 134-164.
  5. Andreas Pape & Subir Bose & Emre Ozdenoren, 2004. "Optimal auctions with ambiguity," Econometric Society 2004 North American Summer Meetings 609, Econometric Society.
  6. Dirk Bergemann & Karl Schlag, 2005. "Robust Monopoly Pricing," Cowles Foundation Discussion Papers 1527RR, Cowles Foundation for Research in Economics, Yale University, revised Sep 2008.
  7. repec:cup:cbooks:9780521517324 is not listed on IDEAS
  8. Jeff Ely, 2003. "Foundations of Dominant Strategy Mechanisms," Theory workshop papers 658612000000000064, UCLA Department of Economics.
  9. Azrieli, Yaron & Teper, Roee, 2009. "Uncertainty aversion and equilibrium existence in games with incomplete information," MPRA Paper 17617, University Library of Munich, Germany.
  10. Lang, Matthias & Wambach, Achim, 2013. "The fog of fraud – Mitigating fraud by strategic ambiguity," Games and Economic Behavior, Elsevier, vol. 81(C), pages 255-275.
  11. repec:cup:cbooks:9780521741231 is not listed on IDEAS
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:igi:igierp:446. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.