Information Acquisition and Efficient Mechanism Design

Microeconomic Theory

Posted: 26 Jul 2001

See all articles by Dirk Bergemann

Dirk Bergemann

Yale University - Cowles Foundation - Department of Economics; Yale University - Cowles Foundation

Juuso Valimaki

Helsinki School of Economics; University of Southampton - Division of Economics

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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-Clark-Groves 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 overacquisition of information.

Keywords: Auctions, Mechanism Design, Information Acquisition, Ex-ante and Ex-post Efficiency

JEL Classification: C72, D44, D61, D82, D83

Suggested Citation

Bergemann, Dirk and Valimaki, Juuso, Information Acquisition and Efficient Mechanism Design. Microeconomic Theory. Available at SSRN: https://ssrn.com/abstract=271815

Dirk Bergemann (Contact Author)

Yale University - Cowles Foundation - Department of Economics ( email )

28 Hillhouse Ave
New Haven, CT 06520-8268
United States
203-432-3592 (Phone)
203-432-2128 (Fax)

HOME PAGE: http://www.econ.yale.edu/~dirk/

Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

Juuso Valimaki

Helsinki School of Economics ( email )

P.O. Box 21210
Helsinki 00100, 00101
Finland

University of Southampton - Division of Economics ( email )

Southampton, SO17 1BJ
United Kingdom
+44 23 8059 3263 (Phone)

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