Information Acquisition and Efficient Mechanism Design

Abstract

We consider a general mechanism design setting where each agent can acquire covert information before participating in the mechanism. The central question is whether a mechanism exists which provides the efficient incentives for information acquisition ex-ante and implements the efficient allocation conditional on the private information ex-post.

It is shown that in every private value environment the Vickrey-roves-Clark mechanism guarantees both ex-ante as well as ex-post efficiency. In contrast, with common values, ex-ante and ex-post efficiency cannot be reconciled in general. Sufficient conditions in terms of sub- and supermodularity are provided when (all) ex-post efficient mechanisms lead to private under- or over-acquisition of information.

JEL Classification: C72, D44, D60, D82