Efficiency Despite Mutually Payoff-Relevant Private Information: The Finite Case

Scott Johnson, John W Pratt and Richard Zeckhauser

Econometrica, 1990, vol. 58, issue 4, 873-900

Abstract: Individuals with finite private information independently choose acts and messages. Their utilities may depend on all acts and information, including the center's. Incentive payments are separable and fully transferable. Implementable incentives making specified behavior a Bayesian equilibrium are derived whenever the center's information depends stochastically, however slightly, on all relevant private information, and also whenever individuals' relative valuations of acts, however divergent, are not too dissimilarly affected by different states of nature. Feasibility is resolved whenever the desired strategies reveal the agents' beliefs about the center's information. Key concepts of agent similarity are developed for nonresponsive and budget-balancing cases. Copyright 1990 by The Econometric Society.

Date: 1990
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