Informationally Simple Incentives

Simon Gleyze and Agathe Pernoud

Journal of Political Economy, 2023, vol. 131, issue 3, 802 - 837

Abstract: We consider a mechanism design setting in which agents can acquire costly information on their preferences as well as others’. A mechanism is informationally simple if agents have no incentive to learn about others’ preferences. This property is of interest for two reasons. First, it is a necessary condition for the existence of dominant-strategy equilibria in the extended game. Second, this endogenizes an “independent-private-value” property of the interim information structure. We show that, generically, a mechanism is informationally simple if and only if it satisfies a separability condition that rules out most economically meaningful mechanisms.

Date: 2023
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