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Veto Constraint in Mechanism Design: Inefficiency with Correlated Types

Olivier Compte and Philippe Jehiel ()
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Olivier Compte: PJSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: We consider bargaining problems in which parties have access to outside options, the size of the pie is commonly known and each party privately knows the realization of her outside option. We allow for correlations in the distributions of outside options. Parties have a veto right, which allows them to obtain at least their outside option payoff in any event. Besides, agents can receive no subsidy ex post. We show that inefficiencies are inevitable whatever the exact form of correlation, as long as private information is dispersed. We also illustrate how veto constraints differ from ex post participation constraints.

Date: 2009-02
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Citations: View citations in EconPapers (18)

Published in American Economic Journal: Microeconomics, 2009, 1 (1), pp.182-206. ⟨10.1257/mic.1.1.182⟩

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Journal Article: Veto Constraint in Mechanism Design: Inefficiency with Correlated Types (2009) Downloads
Working Paper: Veto Constraint in Mechanism Design: Inefficiency with Correlated Types (2009)
Working Paper: Veto Constraint in Mechanism Design: Inefficiency with Correlated Types (2006) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00754397

DOI: 10.1257/mic.1.1.182

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