Mechanism Design Without Quasilinearity

62 Pages Posted: 12 Jun 2017

See all articles by Tomoya Kazumura

Tomoya Kazumura

University of Tokyo - Graduate School of Economics

Debasis Mishra

Indian Statistical Institute, New Delhi - Delhi Centre

Shigehiro Serizawa

Osaka University - Institute of Social and Economic Research (ISER)

Date Written: June 8, 2017

Abstract

This paper studies a model of mechanism design with transfers where agents' preferences need not be quasilinear.

In such a model:

(1) we characterize dominant strategy incentive compatible mechanisms using a monotonicity property;

(2) we establish a revenue uniqueness result: for every dominant strategy implementable allocation rule, there is a unique payment rule that can implement it; and

(3) we show that every dominant strategy incentive compatible, individually rational, and revenue-maximizing mechanism must charge zero transfer for the worst alternative (outside option).

These results are applicable in a wide variety of problems (single object auction, multiple object auction, public good provision etc.) under suitable richness of type space. In particular, our results can be applied to models where preferences of agents are arbitrarily small perturbations of quasilinear preferences and illustrate the (non)-robustness of some of the classic results in mechanism design with quasilinearity. We show various applications of our results.

Keywords: incentive compatibility, individual rationality, monotonicity, non-quasilinear preferences, revenue equivalence

JEL Classification: D82, D44, D40

Suggested Citation

Kazumura, Tomoya and Mishra, Debasis and Serizawa, Shigehiro, Mechanism Design Without Quasilinearity (June 8, 2017). ISER Discussion Paper No. 1005, Available at SSRN: https://ssrn.com/abstract=2982971 or http://dx.doi.org/10.2139/ssrn.2982971

Tomoya Kazumura

University of Tokyo - Graduate School of Economics ( email )

Tokyo
Japan

Debasis Mishra (Contact Author)

Indian Statistical Institute, New Delhi - Delhi Centre ( email )

7 S .J. S.
Sansanwal Marg
New Delhi, 110016
India

Shigehiro Serizawa

Osaka University - Institute of Social and Economic Research (ISER) ( email )

6-1 Mihogaoka
Ibaraki, Osaka 567-0047
Japan
+81 6 6879 8558 (Phone)
+81 6 6878 2766 (Fax)

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