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Intermediated implementation

Anqi Li and Yiqing Xing

European Economic Review, 2020, vol. 123, issue C

Abstract: We examine problems of “intermediated implementation,” in which a single principal can only regulate limited aspects of the consumption bundles traded between intermediaries and agents with hidden characteristics. An example is sales, in which retailers offer menus of consumption bundles to customers with hidden tastes, whereas a manufacturer with a potentially different goal from retailers’ is limited to regulating sold consumption goods but not retail prices by legal barriers. We study how the principal can implement through intermediaries any social choice rule that is incentive compatible and individually rational for agents. We demonstrate the effectiveness of per-unit fee schedules and distribution regulations, which hinges on whether intermediaries have private or interdependent values. We give further applications to healthcare regulation and income redistribution.

Keywords: Implementation; vertical structure; adverse selection; monopolistic screening (search for similar items in EconPapers)
JEL-codes: D40 D82 H21 I13 L10 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:123:y:2020:i:c:s0014292120300192

DOI: 10.1016/j.euroecorev.2020.103387

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European Economic Review is currently edited by T.S. Eicher, A. Imrohoroglu, E. Leeper, J. Oechssler and M. Pesendorfer

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