Mechanism Design by an Informed Principal: The Quasi-Linear Private-Values Case
We show that, in environments with independent private values and transferable utility, a privately informed principal can implement a contract that is ex-ante optimal for her. As an application, we consider a bilateral exchange environment (Myerson and Satterthwaite, 1983) in which the principal is one of the traders. If the property rights over the good are dispersed among the traders, the principal will implement a contract in which she is almost surely better off than if there were no uncertainty about her information. The optimal contract is a combination of a participation fee, a buyout option for the principal, and a resale stage with posted prices and, hence, is a generalization of the posted price that would be optimal if the principal's valuation were commonly known. We also provide a condition under which the principal implements the same contract regardless of whether the agents know her information or not.
|Date of creation:||2013|
|Date of revision:|
|Contact details of provider:|| Postal: Geschwister-Scholl-Platz 1, D-80539 Munich, Germany|
Web page: http://www.sfbtr15.de/
More information through EDIRC
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.:
- Kfir Eliaz & Ran Spiegler, 2007.
"A Mechanism-Design Approach to Speculative Trade,"
Econometric Society, vol. 75(3), pages 875-884, 05.
- Kfir Eliaz & Rani Spiegler, 2005. "A Mechanism-Design Approach to Speculative Trade," Levine's Bibliography 784828000000000429, UCLA Department of Economics.
- Eliaz, Kfir & Spiegler, Ran, 2005. "A Mechanism-Design Approach to Speculative Trade," CEPR Discussion Papers 5434, C.E.P.R. Discussion Papers.
- Hector Chade & Randolph Silvers, .
"Informed Principal, Moral Hazard, and the Value of a More Informative Technology,"
2133302, Department of Economics, W. P. Carey School of Business, Arizona State University.
- Chade, Hector & Silvers, Randy, 2002. "Informed principal, moral hazard, and the value of a more informative technology," Economics Letters, Elsevier, vol. 74(3), pages 291-300, February.
- Bond, E.W. & Gresik & T.A., 1995.
"Competition Between Asymmetrically Informed Principals,"
11-95-13, Pennsylvania State - Department of Economics.
- Eric W. Bond & Thomas A. Gresik, 1997. "Competition between asymmetrically informed principals," Economic Theory, Springer, vol. 10(2), pages 227-240.
- Borgers, Tilman & Norman, Peter, 2005.
"A Note on Budget Balance under Interim Participation Constraints: The Case of Independent Types,"
Microeconomics.ca working papers
norman-05-02-08-08-39-42, Vancouver School of Economics, revised 23 Jun 2005.
- Tilman Börgers & Peter Norman, 2009. "A note on budget balance under interim participation constraints: the case of independent types," Economic Theory, Springer, vol. 39(3), pages 477-489, June.
- Tilman Borgers & Peter Norman, 2005. "A Note on Budget Balance under Interim Participation Constraints: The Case of Independent Types," Levine's Bibliography 784828000000000147, UCLA Department of Economics.
- Tilman Börgers & Peter Norman, 2005. "A Note on Budget Balance under Interim Participation Constraints: The Case of Independet Types," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2005_14, Max Planck Institute for Research on Collective Goods.
- Tilman Börgers & Peter Norman, 2005. "A Note on Budget Balance under Interim Participation Constraints: The Case of Independent Types," Levine's Bibliography 784828000000000171, UCLA Department of Economics.
- Michela CELLA, 2007.
"Informed principal with correlation,"
Departmental Working Papers
2007-11, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
- Celik, Gorkem, 2009.
"Mechanism design with collusive supervision,"
Journal of Economic Theory,
Elsevier, vol. 144(1), pages 69-95, January.
- Beaudry, Paul, 1994. "Why an Informed Principal May Leave Rents to an Agent," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(4), pages 821-32, November.
When requesting a correction, please mention this item's handle: RePEc:trf:wpaper:437. 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: (Tamilla Benkelberg)
If references are entirely missing, you can add them using this form.