Efficient Design with Interdependent Valuations and an Informed Center

28 Pages Posted: 30 Jul 2002

See all articles by Scott Johnson

Scott Johnson

Australian National University (Deceased)

Nolan H. Miller

University of Illinois at Urbana-Champaign

John W. Pratt

Harvard Business School

Richard J. Zeckhauser

Harvard University - Harvard Kennedy School (HKS); National Bureau of Economic Research (NBER)

Date Written: June 2002

Abstract

We consider mechanism design in social choice problems in which agents' types are mutually payoff-relevant, multidimensional, and take on a continuum of possible values. If the center receives a signal that is stochastically related to the agents' types and direct returns are bounded, for any decision rule there is a balanced transfer scheme that ensures that any strategy that is not arbitrarily close to truthful is dominated by one that is. If direct returns are also continuous, truthful revelation becomes a nearly dominant strategy, all Bayes-Nash equilibrium strategies are nearly truthful, and at least one such strategy exists. If the center's information is not informative but agents' types are stochastically related, then there are balanced transfers under which truthful revelation is a Bayesian epsilon-equilibrium, again for any decision rule. Analogous results hold when agents also take mutually payoff-relevant actions in advance of any action by the center.

Keywords: Economics - Economic and Econometric Theory, Economics - Microeconomics

Suggested Citation

Johnson, Scott and Miller, Nolan and Pratt, John W. and Zeckhauser, Richard J., Efficient Design with Interdependent Valuations and an Informed Center (June 2002). Available at SSRN: https://ssrn.com/abstract=320247 or http://dx.doi.org/10.2139/ssrn.320247

Scott Johnson

Australian National University (Deceased)

N/A

Nolan Miller

University of Illinois at Urbana-Champaign ( email )

1206 South Sixth Street
Champaign, IL 61820
United States
1-217-244-2847 (Phone)

HOME PAGE: http://www.business.illinois.edu/nmiller

John W. Pratt

Harvard Business School ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

Richard J. Zeckhauser (Contact Author)

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States
617-495-1174 (Phone)
617-384-9340 (Fax)

National Bureau of Economic Research (NBER) ( email )

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Cambridge, MA 02138
United States
617-495-1174 (Phone)
617-496-3783 (Fax)

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