Full Surplus Extraction and within-period Ex Post Implementation in Dynamic Environments
56 Pages Posted: 23 Jan 2014 Last revised: 3 Aug 2017
Date Written: June 16, 2017
Abstract We study the properties of the information structure that guarantees full surplus extraction and implementation of allocation rules in dynamic environments. We exploit intertemporal correlations of agents' types to construct within-period ex post incentive compatible mechanisms. First, we formulate one-shot environments, in which a single agent has a hidden type and the planner can observe a public signal about the agent's type after a type-contingent allocation is chosen. We propose the necessary and sufficient conditions for full surplus extraction (strong detectability) and for implementability of the targeted allocation rule (weak detectability) in this one-shot problem. Then, we decompose the general dynamic information problem into one-shot problems to apply the above results, and obtain the sufficient conditions for surplus extraction and implementation.
Keywords: Dynamic mechanism design, perfect Bayesian equilibrium, revenue maximization, full surplus extraction
JEL Classification: C73, D47, D42, D44, D82
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