Efficient and Neutral Mechanisms in Almost Ex Ante Bargaining Problems

Abstract

I consider two-person bargaining problems in which mechanism is selected at the almost ex ante stage---when there is some positive probability that players may have learned their private types---and the chosen mechanism is implemented at the interim stage. For these problems, I define almost ex ante incentive efficient mechanisms and apply the concept of neutral optima (Myerson 1984). I show that those mechanisms may not be ex ante incentive efficient. This note suggests that ex ante incentive efficient mechanisms are not robust to a perturbation of the ex ante informational structure at the time of mechanism selection.

Keywords: Bargaining, incomplete information, mechanism selection, almost ex ante stage, incentive efficiency, neutral optima

JEL Classification: C71, C78, D74, D82