Mechanism Design with Ambiguous Communication Devices

47 Pages Posted: 20 Jun 2011

See all articles by Subir Bose

Subir Bose

University of Leicester - Department of Economics

Ludovic Renou

Queen Mary University of London

Date Written: June 20, 2011

Abstract

This paper considers mechanism design problems in environments with ambiguity-sensitive individuals. The novel idea of the paper is to introduce ambiguity in mechanisms so as to exploit the ambiguity sensitivity of individuals. We prove a revelation principle for the partial implementation of social choice functions by ambiguous mechanisms. We then revisit the classical monopolistic screening problem and show that ex-post full surplus extraction is possible, even when there is no ex-ante ambiguity.

Keywords: Mechanism design, ambiguity, revelation principle, communication device

JEL Classification: C72, D71

Suggested Citation

Bose, Subir and Renou, Ludovic, Mechanism Design with Ambiguous Communication Devices (June 20, 2011). Available at SSRN: https://ssrn.com/abstract=1868132 or http://dx.doi.org/10.2139/ssrn.1868132

Subir Bose

University of Leicester - Department of Economics ( email )

Department of Economics
Leicester LE1 7RH, Leicestershire LE1 7RH
United Kingdom

Ludovic Renou (Contact Author)

Queen Mary University of London ( email )

Mile End Road
London, London E1 4NS
United Kingdom

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