Information Acquisition and Full Surplus Extraction

Abstract

It is well known that when agents' types are correlated, the mechanism designer can extract the entire surplus. This creates an incentive for agents to acquire information about other agents' types. Robust lotteries (are payment schemes that) support full extraction and partially robust lotteries support efficient implementation in the presence of information acquisition opportunities. Necessary and sufficient conditions for existence of robust and partially robust lotteries are derived. If an agent's information signal spans the set of other agents' types then robust lotteries do not exist. However, by inducing agents to report their signal realizations the mechanism designer may be able to extend the type space so that robust lotteries exist.

Keywords: mechanism design, information acquisition, full surplus extraction

JEL Classification: D44