TY - JOUR
T1 - The relevance of private information in mechanism design
AU - Neeman, Zvika
N1 - Funding Information:
I am grateful for the suggestions made by Itzhak Gilboa, Hsueh-Ling Huynh, Stephen Morris, Bob Rosenthal, Steve Tadelis, Shmuel Zamir, and seminar audiences at the Center for Rationality at the Hebrew University, Econometric Society Meeting in Montreal, Harvard/MIT, Northwestern Summer Microtheory Workshop, Penn, and Rice. An associate editor and two anonymous referees provided particularly useful comments. Financial support from the NSF under Grant SBR-9806832 is gratefully acknowledged.
PY - 2004/7
Y1 - 2004/7
N2 - Recent results in mechanism design show that as long as agents have correlated private information and are sufficiently risk neutral, it is possible to design mechanisms that leave agents with arbitrarily small information rents. We show that these full-rent-extraction results hinge on the implicit assumption that the agents' beliefs uniquely determine their preferences. We present an example of the voluntary provision of a public good in which this assumption is relaxed, and consequently, even in highly correlated environments, if agents' beliefs do not uniquely determine their preferences, then the extraction of the agents' entire information rents is impossible.
AB - Recent results in mechanism design show that as long as agents have correlated private information and are sufficiently risk neutral, it is possible to design mechanisms that leave agents with arbitrarily small information rents. We show that these full-rent-extraction results hinge on the implicit assumption that the agents' beliefs uniquely determine their preferences. We present an example of the voluntary provision of a public good in which this assumption is relaxed, and consequently, even in highly correlated environments, if agents' beliefs do not uniquely determine their preferences, then the extraction of the agents' entire information rents is impossible.
KW - Correlated information
KW - Information rents
KW - Mechanism design
KW - Private information
KW - Public goods
KW - Surplus extraction
UR - http://www.scopus.com/inward/record.url?scp=3142768279&partnerID=8YFLogxK
U2 - 10.1016/j.jet.2003.09.001
DO - 10.1016/j.jet.2003.09.001
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AN - SCOPUS:3142768279
SN - 0022-0531
VL - 117
SP - 55
EP - 77
JO - Journal of Economic Theory
JF - Journal of Economic Theory
IS - 1
ER -