Competing Mechanisms: Theory and Applications in Directed Search Markets

Seungjin Han

Department of Economics Working Papers from McMaster University

Abstract: This paper studies competing mechanism problems in directed search markets in which multiple principals (e.g., sellers) simultaneously post trading mechanisms to compete for trading opportunities while multiple agents (e.g., buyers) select any particular principal for trading via directed search. Principals can deviate to any arbitrary mechanisms. When a principal's deviation becomes evident from agents' messages, the equilibrium mechanisms posted by non-deviating principals allow them to punish a deviating principal with dominant strategy incentive compatible (DIC) direct mechanisms only in a class of DIC direct mechanisms that are available for punishment in a game. This makes equilibrium analysis tractable and induces rich applications. The theory provides a general characterization of the set of robust equilibrium allocations that are supportable in a game given a class of DIC direct mechanisms that principals can use to punish a deviating principal. Our equilibrium concept is applied to various competing mechanism problems (e.g., competing prices, competing auctions, competing ski-lift pricing, etc.).

Keywords: competing mechanisms; directed search; robust equilibrium; competing auctions; competing ski-lift pricing (search for similar items in EconPapers)
JEL-codes: C72 D47 D82 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2015-06, Revised 2016-05
New Economics Papers: this item is included in nep-cse, nep-gth and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:mcm:deptwp:2015-07

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