On Competing Mechanisms Under Exclusive Competition
36 Pages Posted: 28 Aug 2018
Date Written: June 22, 2018
We study games in which several principals design mechanisms in the presence of privately informed agents. Competition is exclusive: each type of each agent can participate with at most one principal and meaningfully communicate only with him. Economic models of exclusive competition restrict principals to use standard direct mechanisms, which induce truthful revelation of agents’ exogenous private information. This paper investigates the rationale for this restriction. We provide two results. First, we construct examples showing that direct mechanisms fail to completely characterize equilibrium outcomes even if we restrict to pure strategy equilibria. Second, we show that truth-telling strongly robust equilibrium outcomes survive against principals’ unilateral deviations toward arbitrary mechanisms.
Keywords: Competing Mechanisms, Exclusive Competition, Incomplete Information
JEL Classification: D82
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