Mechanism design with side payments: Individual rationality and iterative dominance
- 作者：Hitoshi Matsushima
- 关键词：Incentive compatibility ; Budget balancing ; Interim individual rationality ; Iterative dominance ; Full surplus extraction ; Auctions with a risk-averse principal
- 刊名：Journal of Economic Theory
- 出版年：2007
- 期刊代码：70_00220531
- 类别：eco
- 出版时间：March 2007
- 卷：133
- 期：1
- 页码：1-30
- 文件大小：313 K
摘要
We investigate the collective decision with incomplete information and side payments. We show that a direct mechanism associated with the social choice function that satisfies budget balancing, incentive compatibility, and interim individual rationality exists for generic prior distributions. We consider the possibility that a risk-averse principal extracts full surplus in agency problems with adverse selection. With regard to generic prior distributions, we show that there exists a modified direct mechanism associated with the virtual social choice function, which satisfies budget balancing and interim individual rationality, such that truth telling is the unique three times iteratively undominated message rule profile.