Mechanism Design in Hidden Action and Hidden Information: Richness and Pure-VCG

Hitoshi Matsushima and Shunya Noda

No CIRJE-F-1057, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: 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' compensation—are the only mechanisms that induce an efficient action profile. Contrariwise, the popular pivot mechanism, implemented by ascending auctions that determine the winner's payment, generally fails to induce any efficient action profile.

Pages: 45 pages
Date: 2017-07
New Economics Papers: this item is included in nep-des and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.cirje.e.u-tokyo.ac.jp/research/dp/2017/2017cf1057.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tky:fseres:2017cf1057

Access Statistics for this paper

More papers in CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo Contact information at EDIRC.
Bibliographic data for series maintained by CIRJE administrative office ().