Correlated Information and Mecanism Design
Copyright policy )Correlated Information and Mecanism Design
Summary: In most models of asymmetric information, possession of private information leads to rents for the possessors. This tends to induce mechanism designers to distort away from efficiency. We show that this is an artifact of the presumption that information is independently distributed. Rent extraction in a large class of mechanism design games is analyzed, and a necessary and sufficient condition for arbitrarily small rents to private information is provided. In addition, the two person bargaining game is shown to have an efficient solution under first order stochastic dominance and a hazard rate condition. Similar conditions lead to full rent extraction in Milgrom-Weber auctions.
Economics of information, mechanism design games, stochastic dominance, private information, two person bargaining, Auctions, bargaining, bidding and selling, and other market models, Cooperative games, asymmetric information
Economics of information, mechanism design games, stochastic dominance, private information, two person bargaining, Auctions, bargaining, bidding and selling, and other market models, Cooperative games, asymmetric information
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