The Design of Ambiguous Mechanisms

descriptionPublicationkeyboard_double_arrow_right Article , Other literature type , Research , Preprint 01 Jan 2012 Italy English Publisher:Elsevier BVJournal:SSRN Electronic Journal (eissn: 1556-5068,

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Authors: DI TILLIO, ALFREDO; KOS, NENAD; MESSNER, MATTHIAS;

doi: 10.2139/ssrn.2497284 , 10.1093/restud/rdw051 , 10.2139/ssrn.2106097

handle: 10419/102113 , 11565/3990755

The Design of Ambiguous Mechanisms

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Abstract

This paper explores the sale of an object to an ambiguity averse buyer. We show that the seller can increase his profit by using an ambiguous mechanism. That is, the seller can benefit from hiding certain features of the mechanism that he has committed to from the agent. We then characterize the profit maximizing mechanisms for the seller and characterize the conditions under which the seller can gain by employing an ambiguous mechanism.

Country

Italy

Related Organizations

Università Luigi Bocconi
Italy
University of Cologne
Germany

Keywords

ambiguity aversion, ddc:330, optimal mechanism design, individual rationality, C72, D82, incentive compatibility, OPTIMAL MECHANISM DESIGN, AMBIGUITY AVERSION, INCENTIVE COMPATIBILITY, INDIVIDUAL RATIONALITY, optimal mechanism design, ambiguity aversion, incentive compatibility, individual rationality, D44, jel: jel:C72, jel: jel:D82, jel: jel:D44

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