Collective Decision Through an Informed Mediator

55 Pages Posted: 2 Mar 2021 Last revised: 11 Apr 2024

See all articles by Yunan Li

Yunan Li

City University of Hong Kong (CityU)

Xingtan Zhang

University of Colorado at Boulder - Department of Finance

Date Written: April 8, 2024

Abstract

An imperfectly informed mediator (or mechanism designer) must make a decision on behalf of a group of agents, who are privately informed about their valuations attached to the decision. The mediator chooses a mechanism before observing a signal about the agents' valuations and commits to truthfully using this information in the mechanism. We give a necessary and sufficient condition on the mediator's information under which the ex post efficient decision rule can be implemented by an ex ante budget balanced, dominant strategy incentive-compatible and ex post individually rational mechanism. In a large economy, we show that the amount of information that the mediator needs to know about each agent to achieve ex post efficiency is bounded as the number of agents grows to infinity.

Keywords: Collective Decision; Provision of Public Goods, Asymmetric Information, Cross-Subsidization Mechanism, Public Finance

JEL Classification: C70, D82, G23, G38, H41

Suggested Citation

Li, Yunan and Zhang, Xingtan, Collective Decision Through an Informed Mediator (April 8, 2024). Journal of Economic Theory, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3761473 or http://dx.doi.org/10.2139/ssrn.3761473

Yunan Li

City University of Hong Kong (CityU) ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong

Xingtan Zhang (Contact Author)

University of Colorado at Boulder - Department of Finance ( email )

Campus Box 419
Boulder, CO 80309
United States

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