Divisive By Design: Shaping Values in Optimal Mechanisms

Anja Prummer and Francesco Nava

No 69, Berlin School of Economics Discussion Papers from Berlin School of Economics

Abstract: We study a principal who allocates a good to agents with private, independently distributed values through an optimal mechanism. The principal can strategically shape these value distributions by modifying the good’s features, which affect agents’ valuations. Our analysis reveals that optimal designs are frequently divisive—creating goods that appeal strongly to specific agents or agent types while being less valued by others. These divisive designs reduce information rents and increase total surplus, at the expense of competition. Even when total surplus is constrained, some divisiveness in designs remains optimal.

Keywords: Value Design; Mechanism Design; Di!erentiation (search for similar items in EconPapers)
JEL-codes: D46 D82 L15 (search for similar items in EconPapers)
Pages: 52, 14 pages
Date: 2025-07-23
New Economics Papers: this item is included in nep-des and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:bdp:dpaper:0069

DOI: 10.48462/opus4-5894

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