Informational Smallness and the Scope for Limiting Information Rents

37 Pages Posted: 31 Aug 2009

See all articles by Alia Gizatulina

Alia Gizatulina

Max Planck Institute for Research on Collective Goods

Martin F. Hellwig

Max Planck Institute for Research on Collective Goods; University of Bonn - Department of Economics; European Corporate Governance Institute (ECGI)

Date Written: August 2009

Abstract

For an incomplete-information model of public-good provision with interim participation constraints, we show that efficient outcomes can be approximated, with approximately full surplus extraction, when there are many agents and each agent is informationally small. The result holds even if agents' payoffs cannot be unambiguously inferred from their beliefs, i.e., even if the so-called BDP property ("Beliefs Determine Preferences") of Neeman (2004) does not hold. The contrary result of Neeman (2004) rests on an implicit uniformity requirement that is incompatible with the notion that agents are informationally small because there are many other agents who have information about them.

Keywords: BDP, correlated information, informational smallness, Mechanism Design, surplus extraction

JEL Classification: D40, D44, D80, D82

Suggested Citation

Gizatulina, Alia and Hellwig, Martin F., Informational Smallness and the Scope for Limiting Information Rents (August 2009). MPI Collective Goods Preprint, No. 2009/28, Available at SSRN: https://ssrn.com/abstract=1463254 or http://dx.doi.org/10.2139/ssrn.1463254

Alia Gizatulina

Max Planck Institute for Research on Collective Goods ( email )

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany

Martin F. Hellwig (Contact Author)

Max Planck Institute for Research on Collective Goods ( email )

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany

University of Bonn - Department of Economics

Adenauerallee 24-42
D-53113 Bonn
Germany

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium