Generalizing mechanism design theory to a case where agents' types are adjustable

Haoyang Wu ()

MPRA Paper from University Library of Munich, Germany

Abstract: In mechanism design theory, a designer would like to implement a desired social choice function which specifies her favorite outcome for each possible profile of all agents' types. Since the designer does not know each agent's private type, what she can do is to construct a mechanism and choose an outcome after observing a profile of agents' strategies. There is a dilemma in the sense that even if the designer is not satisfied with some outcome, she has to obey the mechanism designed by herself and announce this outcome. In this paper, we generalize the mechanism design theory to a case where the designer can take some action to actively adjust agents' private types, and yield a more favorite outcome. After defining a series of notions such as adjustable types, optimal adjustment cost and profitably Bayesian implementability, we propose that the traditional notion of Bayesian incentive compatibility does not hold in this generalized case. Finally, we construct a model to illustrate that the auctioneer can obtain an expected profit greater than what she obtains in the traditional optimal auction.

Keywords: Mechanism design; Optimal auction; Bayesian Nash implementation. (search for similar items in EconPapers)
JEL-codes: D71 (search for similar items in EconPapers)
Date: 2018-12-24
New Economics Papers: this item is included in nep-des, nep-gth and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/90804/1/MPRA_paper_90804.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/90941/1/MPRA_paper_90941.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/90981/1/MPRA_paper_90981.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/91304/1/MPRA_paper_91304.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/91743/1/MPRA_paper_91743.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/94242/1/MPRA_paper_94242.pdf revised version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:90804

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().