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Mechanism design with private communication

Author

Listed:
  • Dequiedt, V.
  • Martimort, D.

Abstract

We investigate the consequences of assuming "private" communication between the principal and each of his agents in an otherwise standard mechanism design setting.Doing so simplifies significantly optimal mechanisms and institutions. Moreover, it restores continuity of the principal's payoff and of the optimal mechanism with respect to the information structure while still maintaining the useful role of correlation to better extract the agents' information rent. We first prove a "Revelation Principle with private communication" that characterizes the set of allocations implementable under private communication by means of simple "non-manipulability constraints". We also demonstrate a "Taxation Principle" which helps drawing some links between private communication and limited commitment on the principal's side. Equipped with those tools, we derive optimal non-manipulable mechanisms in various environments (unrelated projects, auctions, team production).

Suggested Citation

  • Dequiedt, V. & Martimort, D., 2007. "Mechanism design with private communication," Working Papers 200702, Grenoble Applied Economics Laboratory (GAEL).
    • Handle: RePEc:gbl:wpaper:200702
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    File URL: https://gael.univ-grenoble-alpes.fr/sites/default/files/Mediatheque/doc-recherche/WP/A2007/gael2007-03.pdf
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    Cited by:

    1. Yu Chen, 2013. "Bilateral Mechanism Design: Practical Contracting in Multi-Agency," CAEPR Working Papers 2013-003, Center for Applied Economics and Policy Research, Department of Economics, Indiana University Bloomington.
    2. Fahad Khalil & Jacques Lawarrée & Troy J. Scott, 2015. "Private monitoring, collusion, and the timing of information," RAND Journal of Economics, RAND Corporation, vol. 46(4), pages 872-890, October.
    3. Mohammad Akbarpour & Shengwu Li, 2020. "Credible Auctions: A Trilemma," Econometrica, Econometric Society, vol. 88(2), pages 425-467, March.
    4. Julien Daubanes & Jean-Charles Rochet, 2013. "Activists versus Captured Regulators," CESifo Working Paper Series 4444, CESifo.
    5. Yu Chen & Zhenhua Wu, 2012. "Delegation Principle for Multi-agency Games under Ex Post Equilibrium," CAEPR Working Papers 2012-008, Center for Applied Economics and Policy Research, Department of Economics, Indiana University Bloomington.
    6. repec:inu:caeprp:2012-008 is not listed on IDEAS
    7. Piccolo, Salvatore & D'Amato, Marcello & Martina, Riccardo, 2008. "Product market competition and organizational slack under profit-target contracts," International Journal of Industrial Organization, Elsevier, vol. 26(6), pages 1389-1406, November.

    More about this item

    Keywords

    MECHANISM DESIGN; PRIVATE COMMUNICATION;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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