404 research outputs found
Incentive compatibility in non-quasi linear environments
No full textWe derive several implications of incentive compatibility in general (i.e., not necessarily quasilinear) environments. Building on Kos and Messner (2013), we provide a (partial) characterization of incentive compatible mechanisms
Communication and Efficiency in Auctions
No full textWe study auctions under restricted communication. Agents have valuations distributed over an interval but can only report one of a finite number of messages. We provide necessary conditions for welfare as well as revenue maximizing auctions in the independent private values case when bidders report simultaneously. We also show that the seller who chooses how to allocate a fixed number of messages allocates them evenly over all agents
Asking questions
No full textWe examine a model of limited communication in which the seller is selling a single good to two potential buyers. In each of the finite number of periods the seller asks one of the two buyers a binary question. After the final answer, the allocation and the transfers are executed. The model sheds light on the communication protocols that arise in welfare maximizing mechanisms
Signaling covertly acquired information
No full textWe study the interplay between information acquisition and signaling. A sender decides whether to learn his type at a cost prior to taking a signaling action. A receiver observes the signaling action and responds. We characterize equilibria and apply a version of never a weak best response refinement in the environment where the information acquisition is observable as well as in the environment where it is covert. Covert information acquisition always leads to information acquisition when information is cheap. Observable information acquisition, on the other hand, does not necessarily
Extremal Incentive Compatible Transfers
No full textWe characterize the boundaries of the set of transfers implementing a given allocation
rule without imposing any assumptions on the agent's type space or utility function besides
quasi-linearity. In particular, we characterize the pointwise largest and the pointwise smallest
transfer that implement a given allocation rule and are equal to zero at some prespecified
type (extremal transfers). Exploiting the concept of extremal transfers allows us to obtain
an exact characterization of the set of all implementable allocation rules (the set of transfers
is non-empty) and the set of allocation rules satisfying Revenue Equivalence (the extremal
transfers coincide).
Furthermore, we show how the extremal transfers can be put to use in mechanism design
problems where Revenue Equivalence does not hold. To this end we first explore the
role of extremal transfers when the agents with type dependent outside options are free to
participate in the mechanism. Finally, we consider the question of budget balanced implementation.
We show that an allocation rule can be implemented in an incentive compatible,
individually rational and ex post budget balanced mechanism if and only if there exists an
individually rational extremal transfer scheme that delivers an ex ante budget surplus
Information in Tender Offers with a Large Shareholder
No full textWe study tender offers for a firm which is owned by one large shareholder who holds less than half of the total shares, and many small shareholders who each hold a unit share. Each shareholder is privately informed, yet uncertain, about the raider’s ability to improve the value of the firm, whereas the raider is uninformed. In the benchmark model of symmetric information, the raider is unable to make a profit. As shown in Marquez and Yılmaz (2008), the same obtains when the raider is facing only privately informed small shareholders. We show, however, that the combination of dispersed private information on the side of shareholders and the presence of a large shareholder can facilitate prof-itable takeovers. More precisely, for any given information structure, the raider can make a profit if the large shareholder holds a sufficiently large stake in the company. In the unique equilibrium outcome, neither the probability of a suc-cessful takeover nor the equilibrium price offer depend on the large shareholder’s information. When the equilibrium price offer is positive, the large shareholder tenders all of his shares regardless of his information. Finally, we show that th
The design of ambiguous mechanisms
No full textThis 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. Finally, we propose a class of ambiguous mechanisms that are easy to implement and perform better than the best non-ambiguous mechanism
Optimal pricing, private information and search for an outside offer
No full textA buyer can either buy a good at a local monopolist or search for it in the market. The more intensely the buyer searches, the more likely he will find the good in the market; if his search fails, he can still buy it from the local monopolist. We show that a buyer with a higher willingness to pay searches (weakly) more intensely. This skews the distribution of types buying at the local monopolist towards lower valuations and exerts pressure on the local monopolist to reduce his price. Despite this effect, offering the monopoly price remains weakly optimal in equilibrium
Just enough or all: selling a firm
No full textWe consider the problem of selling a firm to a single buyer. The buyer privately knows post-sale cash flows and the benefits of control. Unlike the case where buyer’s private information is one-dimensional, the optimal mechanism is a menu of tuples of cash-equity mixtures. When the seller wants to screen finely with respect to the private benefits, he makes an offer for the smallest fraction of the company that facilitates the transfer of control. When he wants to screens finely with respect to cash flows, he makes an offer for all the shares of the company
Epidemics with behavior
No full textWe study social distancing in an epidemiological model. Distancing reduces the individual's probability of getting infected but comes at a cost. Equilibrium distancing flattens the curve and decreases the final size of the epidemic. We examine the effects of distancing on the outset, the peak, and the final size of the epidemic. First, the prevalence increases beyond the initial value only if the transmission rate is in the intermediate region. Second, the peak of the epidemic is non-monotonic in the transmission rate. A reduction in the transmission rate can increase the peak. However, a decrease in the cost of distancing always flattens the curve. Third, both a reduction in the transmission rate as well as a reduction in the cost of distancing decrease the final size of the epidemic. Our results suggest that public policies that decrease the transmission rate can lead to unintended negative consequences in the short run but not in the long run. Therefore, it is important to distinguish between interventions that affect the transmission rate and interventions that affect contact rates
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