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Intermediated Implementation

Anqi Li and Yiqing Xing

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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.

Date: 2018-10, Revised 2020-01
New Economics Papers: this item is included in nep-des and nep-mic
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Handle: RePEc:arx:papers:1810.11475