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-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