Mechanism Design in Hidden Action and Hidden Information: Richness and Pure-VCG (Revised version of F-386)
Hitoshi Matsushima and
No CARF-F-415, CARF F-Series from Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo
We investigate general mechanism design problems in which agents can take hidden actions that influence state distribution. Their action choices exert significant externality effects on their valuation functions through this influence. We characterize all mechanisms that resolve the hidden action problem (i.e., that induce a targeted action profile). A variety of action choices shrinks the set of mechanisms that induce the targeted action profile, leading to the equivalence properties in the ex-post term with respect to payoffs, payments, and revenues. When the agents can take unilateral deviations to change the state distribution in various directions (i.e., when the action profile satisfies richness), pure-VCG mechanisms-the simplest form of canonical VCG mechanism, which is implemented via open-bid descending procedures that determine the losers' compensationâ€”are the only mechanisms that induce an efficient action profile. Contrariwise, the popular pivot mechanism, implemented by ascending auctions that determine the winnerâ€™s payment, generally fails to induce any efficient action profile.
New Economics Papers: this item is included in nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:cfi:fseres:cf415
Access Statistics for this paper
More papers in CARF F-Series from Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo Contact information at EDIRC.
Bibliographic data for series maintained by ().