Information Without Rents: Mechanism Design Without Expected Utility

Ernesto Rivera Mora and Philipp Strack
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Ernesto Rivera Mora: University of Colorado, Boulder
Philipp Strack: Yale University

No 2481, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We study mechanism design for a sophisticated agent with non-expected utility (EU) preferences. We show that the revelation principle holds if and only if all types are EU maximizers: if at least one type is a non-EU maximizer, randomizing over dynamic mechanisms generates a strictly larger set of implementable allocations than using static mechanisms. Moreover, dynamic stochastic mechanisms can fully extract the private information of any type who doesn't have uniformly quasi-concave preferences without providing that type any rent. Full-surplus extraction is possible in a broad variety of non-EU environments, but impossible for types with concave preferences.

Pages: 55 pages
Date: 2025-12-30
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