Beliefs, Payoffs, Information: On the Robustness of the BDP Property in Models with Endogenous Beliefs

44 Pages Posted: 27 Mar 2012

See all articles by Alia Gizatulina

Alia Gizatulina

Max Planck Institute for Research on Collective Goods

Martin F. Hellwig

Max Planck Institute for Research on Collective Goods; University of Bonn - Department of Economics; European Corporate Governance Institute (ECGI)

Date Written: March 23, 2012

Abstract

Neeman (2004) and Heifetz and Neeman (2006) have shown that, in auctions with incomplete information about payoffs, full surplus extraction is only possible if agents’ beliefs about other agents are fully informative about their own payoff parameters. They argue that the set of incomplete-information models satisfying this so-called BDP property ("beliefs determine preferences") is negligible, in a geometric and a measure-theoretic sense. In contrast, we show that, in models with finite-dimensional type spaces, this property is topologically generic if the set of objects about which beliefs are formed is sufficiently rich and beliefs are derived by conditioning on the available information; for any agent, this information includes his own payoff parameters.

Keywords: Mechanism Design, surplus extraction, BDP, correlated information, universal type space

JEL Classification: D82, D44, D40, D80

Suggested Citation

Gizatulina, Alia and Hellwig, Martin F., Beliefs, Payoffs, Information: On the Robustness of the BDP Property in Models with Endogenous Beliefs (March 23, 2012). MPI Collective Goods Preprint, No. 2011/28, Available at SSRN: https://ssrn.com/abstract=2028976 or http://dx.doi.org/10.2139/ssrn.2028976

Alia Gizatulina (Contact Author)

Max Planck Institute for Research on Collective Goods ( email )

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany

Martin F. Hellwig

Max Planck Institute for Research on Collective Goods ( email )

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany

University of Bonn - Department of Economics

Adenauerallee 24-42
D-53113 Bonn
Germany

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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