Efficient Investments in the Implementation Problem

Kentaro Tomoeda

No 54, Working Paper Series from Economics Discipline Group, UTS Business School, University of Technology, Sydney

Abstract: This paper identifies a condition for an efficient social choice rule to be fully implementable when we take into account investment efficiency. To do so, we extend the standard implementation problem to include endogenous ex ante and ex post investments. In our problem, the social planner aims to achieve efficiency in every equilibrium of a dynamic game in which agents strategically make investments before and after playing the mechanism. Our main theorem shows that a novel condition commitment-proofness is sufficient and necessary for an efficient social choice rule to be implementable in subgame-perfect equilibria. The availability of ex post investments is crucial in our model: there is no social choice rule that is efficient and implementable in subgame-perfect equilibria without ex post investments. We also show that our positive result continues to hold in the incomplete information setting.

Keywords: investment efficiency; full implementation; mechanism design; ex ante investment (search for similar items in EconPapers)
JEL-codes: C78 D44 D47 D82 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2018-12-18
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: View citations in EconPapers (1)

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Journal Article: Efficient investments in the implementation problem (2019)
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