Mechanism Design with Costly Verification and Limited Punishments, Third Version

Yunan Li ()
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Yunan Li: Department of Economics and Finance, City University of Hong Kong

PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania

Abstract: A principal has to allocate a good among a number of agents, each of whom values the good. Each agent has private information about the principal's payoff if he receives the good. There are no monetary transfers. The principal can inspect agents' reports at a cost and penalize them, but the punishments are limited. I characterize an optimal mechanism featuring two thresholds. Agents whose values are below the lower threshold and above the upper threshold are pooled, respectively. If the number of agents is small, then the pooling area at the top of value distribution disappears. If the number of agents is large, then the two pooling areas meet and the optimal mechanism can be implemented via a shortlisting procedure.

Keywords: Mechanism Design; Costly Verification; Limited Punishments (search for similar items in EconPapers)
JEL-codes: D82 (search for similar items in EconPapers)
Pages: 82 pages
Date: 2017-09-28, Revised 2017-09-28
New Economics Papers: this item is included in nep-des and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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