Mechanism Design Without Revenue Equivalence

Juan Carlos Carbajal () and Jeffrey C. Ely

No 458, Discussion Papers Series from University of Queensland, School of Economics

Abstract: We study mechanism design problems in quasi-linear environments where the en- velope theorem and revenue equivalence principle fail due to non-convex and non- differentiable valuations. Despite these obstacles, we obtain a characterization of in- centive compatibility based on the familiar Mirrlees representation of the indirect util- ity and a monotonicity condition on the allocation rule. These conditions pin down the range of possible payoffs as a function solely of the allocation rule, thus providing a revenue inequality. We illustrate the usefulness of our approach in three economic applications where standard techniques do not apply: we derive the optimal selling mechanism in a buyer-seller situation where the buyer has loss-averse preferences; we find a zero payment (hence budget-balanced) efficient mechanism in a public goods lo- cation model; and we consider a principal–agent model with ex post non-contractible actions available to the agent.

New Economics Papers: this item is included in nep-mic
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (4) Track citations by RSS feed

Downloads: (external link)
http://www.uq.edu.au/economics/abstract/458.pdf (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: http://EconPapers.repec.org/RePEc:qld:uq2004:458

Access Statistics for this paper

More papers in Discussion Papers Series from University of Queensland, School of Economics
Contact information at EDIRC.
Series data maintained by Randal Anderson ().