The Design of Ambiguous Mechanisms

Alfredo Di Tillio, Nenad Kos and Matthias Messner

No 4949, CESifo Working Paper Series from CESifo

Abstract: This paper explores the sale of an object to an ambiguity averse buyer. We show that the seller can increase his profit by using an ambiguous mechanism. That is, the seller can benefit from hiding certain features of the mechanism that he has committed to from the agent. We then characterize the profit maximizing mechanisms for the seller and characterize the conditions under which the seller can gain by employing an ambiguous mechanism.

Keywords: optimal mechanism design; ambiguity aversion; incentive compatibility; individual rationality (search for similar items in EconPapers)
JEL-codes: C72 D44 D82 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Working Paper: The Design of Ambiguous Mechanisms (2012)
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