On the Informed Principal Model with Common Values

20 Pages Posted: 29 Sep 2016 Last revised: 13 Dec 2017

See all articles by Anastasios Dosis

Anastasios Dosis

ESSEC Business School; University of Cergy-Pontoise - THEMA

Date Written: December 13, 2017

Abstract

This paper reconsiders the general informed principal model with unilateral private information and common values and makes the following contributions. First, it provides an alternative, perhaps simpler, proof of Theorem 1 (i.e., the main result) of Maskin and Tirole (1992). Second, it shows that if the principal is restricted to offering mechanisms in which only she makes announcements (e.g., direct revelation mechanisms), then the Rothschild-Stiglitz-Wilson allocation and every allocation that weakly dominates it relative to the prior beliefs (if such an allocation exists) constitutes an equilibrium allocation of the three-stage game even in environments in which this is not interim efficient relative to any non-degenerate beliefs. Finally, it provides a sufficient condition that allows for the complete characterisation of the set of equilibrium allocations even in environments in which sorting is not satisfied.

Keywords: Mechanism design, informed principal, Rothschild-Stiglitz-Wilson allocation, perfect Bayesian equilibrium

JEL Classification: C72, D82

Suggested Citation

Dosis, Anastasios, On the Informed Principal Model with Common Values (December 13, 2017). Available at SSRN: https://ssrn.com/abstract=2844942 or http://dx.doi.org/10.2139/ssrn.2844942

Anastasios Dosis (Contact Author)

ESSEC Business School

3 Avenue Bernard Hirsch
B.P 50105
Cergy - Pontoise Cedex, NA 95021
France

University of Cergy-Pontoise - THEMA ( email )

33 boulevard du port
F-95011 Cergy-Pontoise Cedex, 95011
France

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