Uncertainty and Robustness of Surplus Extraction

Giuseppe Lopomo, Luca Rigotti and Chris Shannon

Papers from arXiv.org

Abstract: This paper studies a robust version of the classic surplus extraction problem, in which the designer knows only that the beliefs of each type belong to some set, and designs mechanisms that are suitable for all possible beliefs in that set. We derive necessary and sufficient conditions for full extraction in this setting, and show that these are natural set-valued analogues of the classic convex independence condition identified by Cremer and McLean (1985, 1988). We show that full extraction is neither generically possible nor generically impossible, in contrast to the standard setting in which full extraction is generic. When full extraction fails, we show that natural additional conditions can restrict both the nature of the contracts a designer can offer and the surplus the designer can obtain.

Date: 2018-11, Revised 2021-10
New Economics Papers: this item is included in nep-cta and nep-mic
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http://arxiv.org/pdf/1811.01320 Latest version (application/pdf)

Related works:
Journal Article: Uncertainty and robustness of surplus extraction (2022)
Working Paper: Uncertainty and Robustness of Surplus Extraction (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1811.01320

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