Role of linking mechanisms in multitask agency with hidden information

We investigate the adverse selection problem where a principal delegates multiple tasks to an agent. We characterize the virtually implementable social choice functions by using the linking mechanism proposed by Jackson and Sonnenschein (2007) [20] that restricts the message spaces. The principal does not require any incentive wage schemes and can therefore avoid any information rent and welfare loss. We show the resemblance between the functioning of this message space restriction and that of incentive wage schemes. We also extend the results of the single-agent model to the multi-agent model.     

Detail-free mechanism design in twice iterative dominance: Large economies

This paper investigates unique implementation in large economies with incomplete information and interdependent values; we degenerate the common knowledge assumptions and assume that a central planner is unaware of the specifications of an environment. With a minor restriction on the class of environments, we demonstrate that there exists a detail-free mechanism that virtually implements competitive allocations with complete information in twice iterative dominance, irrespective of how the environment is specified.     

Bargaining and inequity aversion: On the efficiency of the double auction

In a bargaining setting with asymmetrically informed, inequity-averse parties, a fully efficient mechanism (i.e., the double auction) exists if and only if compassion is strong. Less compassionate parties do not trade in the double auction in the limit of strong envy.     

Multidimensional private value auctions

We consider parametric examples of symmetric two-bidder private value auctions in which each bidder observes her own private valuation as well as noisy signals about her opponent's private valuation. We show that, in such environments, the revenue equivalence between the first and second price auctions (SPAs) breaks down and there is no definite revenue ranking; while the SPA is always efficient allocatively, the first price auction (FPA) may be inefficient; equilibria may fail to exist for the FPA. We also show that auction mechanisms provide different incentives for bidders to acquire costly information about opponents’ valuation.     

A note on the incompatibility of strategy-proofness and Pareto-optimality in quasi-linear settings with public budgets

We show that any deterministic mechanism, for allocating identical items that are complements to budget-constrained bidders, cannot simultaneously satisfy individual-rationality, strategy-proofness, Pareto-efficiency, and no-positive-transfers. This holds even for two bidders, two items, and commonly-known budgets, and generalizes to richer settings.     

THE BEHAVIOUR OF SOLUTIONS TO BARGAINING PROBLEMS ON THE BASIS OF SOLIDARITY*

The main purpose of this paper is to provide a systematic study of the solidarity‐type axioms for classical convex bargaining problems. As a consequence, we present alternative characterizations for some well‐known solutions in the literature. Instead of using the Monotonicity axiom, the paper provides characterizations of the egalitarian solution and the Kalai–Somorodinsky solution using slightly weaker versions of Nash's original IIA for convex bargaining problems with a fixed population.     

Market games with differential information and infinite dimensional commodity spaces: The core

Summary We provide an alternative proof of the existence of core allocations in exchange economies with differential information and infinite dimensional commodity spaces. We also identify a critical feature of information sharing rules that ensures nonemptiness of the core. In essence, the only condition we require on the sharing rules is that profitable insider trading be prohibited. In the absence of insider trading, balancedness is guaranteed and core nonemptiness follows.I thank Dan Arce, Erik Balder, Myrna Wooders, and Nicholas Yannelis for helpful comments. This paper is a greatly revised version of my paper entitled. A Variational Problem Arising in Market Games with Differential Information, written in August of 1991.     

Exchange in a general market with indivisible goods

We show how to restrict trades in exchange markets with heterogeneous indivisible goods so that the resulting restricted exchange markets, the fixed deal exchange markets, have a unique core allocation. Our results on fixed deal exchange markets generalize classical results on the Shapley-Scarf housing market, in which each agent owns one good only. Furthermore, we define the class of fixed deal exchange rules for general exchange markets, and prove that these are the only exchange rules that satisfy strategyproofness, individual rationality, and a weak form of efficiency.     

Approximate cores of games and economies with clubs

We introduce the framework of parameterized collections of games with and without sidepayments and provide three nonemptiness of approximate core theorems. The parameters bound (a) the number of approximate types of players and the size of the approximation and (b) the size of nearly effective groups of players and their distance from exact effectiveness. Our theorems are based on a new notion of partition-balanced profiles and approximately partition-balanced profiles. The results are applied to a new model of an economy with clubs. In contrast to the extant literature, our approach allows both widespread externalities and uniform results. A fundamental new mathematical result, the partition-balancing effect of large numbers, which promises to have further applications, is contained in Appendix A.     

Almost budget-balanced VCG mechanisms to assign multiple objects

Subsidy-free VCG mechanisms assign p identical objects to n agents. The efficiency loss is the largest ratio of budget surplus to efficient surplus, over all profiles of non-negative valuations. The smallest efficiency loss satisfies . If is bounded away from , converges to zero exponentially in n.Participation is voluntary in the optimal mechanism achieving if p=1, but not if p?2. Among voluntary mechanisms, the optimal efficiency loss is not significantly larger than if . But it does not converge to zero in n if .     

Maxmin mechanism in a simple common value auction

This paper models the data generating process of common value auctions in a parameter-estimation way, known as the classical approach in statistical inference. Viewing the true value of the object as a parameter that nobody ever knows, we let our value function be the average of the individual estimations (signals) of all agents, a robust estimation of the parameter. Under this simple value function, we select almost uniquely the mechanism that gives the seller the largest portion of the true value in the worst situation among all the direct mechanisms that are feasible, ex-post implementable and individual rational. Our Maxmin mechanism, which randomly assigns the object to one agent, provides the seller (n−1)/n$(n-1)/n$ of the true value when expected revenue is concerned, where n$n$ is the number of the agents.     

Limited observability as a constraint in contract design

Limited observability is the assumption that economic agents can only observe a finite amount of information. Given this constraint, contracts among agents are necessarily finite and incomplete in comparison to the ideal complete contract that we model as infinite in detail. We consider the extent that finite contracts can approximate a complete contract. The objectives of the paper are: (i) to identify properties of agents’ preferences that determine whether or not finiteness of contracts causes significant inefficiency; (ii) to evaluate the performance of finite contracts against the ideal optimal contract in a bilateral bargaining model.