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Efficient Mechanism Design

Vijay Krishna and Motty Perry

Game Theory and Information from University Library of Munich, Germany

Abstract: We study Bayesian mechanism design in situations where agents' information may be multi-dimensional, concentrating on mechanisms that lead to efficient allocations. Our main result is that a generalization of the well-known Vickrey-Clarke-Groves mechanism maximizes the planner's "revenue'' among all efficient mechanisms. This result is then used to study multiple object auctions in situations where bidders have privately known "demand curves'' and extended to include situations with complementarities across objects or externalities across bidders. We also illustrate how the main result may be used to analyze the possibility of allocating both private and public goods efficiently when budget balance considerations are important. The generalized VCG mechanism, therefore, serves to unify many results in mechansim design theory.

Keywords: Mechanism Design; Efficiency; Incentives; Auctions (search for similar items in EconPapers)
JEL-codes: D44 D61 D82 (search for similar items in EconPapers)
Pages: 24 pages
Date: 1997-03-25, Revised 1998-04-28
Note: Type of Document - SciWord-LaTex; prepared on IBM PC ; to print on HP Laserjet 4; pages: 24 ; figures: None
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