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Reciprocal Relationships and Mechanism Design

  • Celik, Gorkem
  • Peters, Michael

We study an incomplete information game in which players are involved in a reciprocal relationship that allows them to coordinate their actions by contracting among themselves. We model this as a competing mechanism game in which players have the ability to write contracts. We characterize the set of outcome functions that can be supported as equilibrium in this enhanced game. We use our characterization to show that the set of supportable outcomes is bigger than the set of outcomes supported by a centralized mechanism designer who can offer mechanisms in which all players participate. The difference is that the contracting game makes it possible for players to convey partial information about their type at the time they offer contracts.

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File URL: http://montoya.econ.ubc.ca/svn/equilibrium_rejection/negotiated_mechanisms/working_paper/reciprocal_mechanisms.pdf
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Paper provided by Vancouver School of Economics in its series Microeconomics.ca working papers with number gorkem_celik-2011-19.

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Length: 0 pages
Date of creation: 01 Aug 2011
Date of revision: 01 Aug 2011
Handle: RePEc:ubc:pmicro:gorkem_celik-2011-19
Contact details of provider: Web page: http://www.economics.ubc.ca/

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  1. Jean Tirole, 2012. "Overcoming Adverse Selection: How Public Intervention Can Restore Market Functioning," American Economic Review, American Economic Association, vol. 102(1), pages 29-59, February.
  2. Maskin, Eric & Tirole, Jean, 1992. "The Principal-Agent Relationship with an Informed Principal, II: Common Values," Econometrica, Econometric Society, vol. 60(1), pages 1-42, January.
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  4. Laffont, Jean-Jacques & Martimort, David, 1998. "Mechanism Design with Collusion and Correlation," IDEI Working Papers 81, Institut d'Économie Industrielle (IDEI), Toulouse.
  5. Celik, Gorkem & Peters, Michael, 2011. "Equilibrium rejection of a mechanism," Games and Economic Behavior, Elsevier, vol. 73(2), pages 375-387.
  6. Frédéric Koessler & Ariane Lambert-Mogiliansky, 2010. "Committing to transparency to resist corruption," PSE Working Papers halshs-00564890, HAL.
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  8. Jean-Jacques Laffont & David Martimort, 1997. "Collusion under Asymmetric Information," Econometrica, Econometric Society, vol. 65(4), pages 875-912, July.
  9. Gorkem Celik, 2015. "Implementation by Gradual Revelation," RAND Journal of Economics, RAND Corporation, vol. 46(2), pages 271-296, 06.
  10. Vasiliki Skreta & Thomas Philippon, 2010. "Optimal Interventions in Markets with Adverse Selection," 2010 Meeting Papers 1333, Society for Economic Dynamics.
  11. Guofu Tan & Okan Yilankaya, 2005. "Ratifiability of Efficient Collusive Mechanisms in Second-Price Auctions with Participation Costs," IEPR Working Papers 05.15, Institute of Economic Policy Research (IEPR).
  12. Bernard Caillaud & Philippe Jehiel, 1998. "Collusion in Auctions with Externalities," RAND Journal of Economics, The RAND Corporation, vol. 29(4), pages 680-702, Winter.
  13. Fudenberg, Drew & Tirole, Jean, 1991. "Perfect Bayesian equilibrium and sequential equilibrium," Journal of Economic Theory, Elsevier, vol. 53(2), pages 236-260, April.
  14. Jeanne Hagenbach & Frédéric Koessler & Eduardo Perez‐Richet, 2014. "Certifiable Pre‐Play Communication: Full Disclosure," Econometrica, Econometric Society, vol. 82(3), pages 1093-1131, 05.
  15. Cramton Peter C. & Palfrey Thomas R., 1995. "Ratifiable Mechanisms: Learning from Disagreement," Games and Economic Behavior, Elsevier, vol. 10(2), pages 255-283, August.
  16. Peters, Michael & Troncoso-Valverde, Cristian, 2010. "A Folk Theorem for Competing Mechanisms," Microeconomics.ca working papers michael_peters-2010-17, Vancouver School of Economics, revised 19 Oct 2013.
  17. d'Aspremont, Claude & Gerard-Varet, Louis-Andre, 1979. "Incentives and incomplete information," Journal of Public Economics, Elsevier, vol. 11(1), pages 25-45, February.
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