Efficient Mechanisms with Information Acquisition

88 Pages Posted: 3 Apr 2016 Last revised: 26 Jun 2017

See all articles by Yunan Li

Yunan Li

City University of Hong Kong (CityU)

Date Written: June 23, 2017

Abstract

This paper studies the design of ex ante efficient mechanisms in situations where a single object is for sale, and agents have positively interdependent values and can covertly acquire information at some cost before participating in a mechanism. We find that when the strength of interdependence is low or the number of agents is large, the ex post efficient mechanism is also ex ante efficient. In cases of high interdependence or a small number of agents, ex ante efficient mechanisms discourage agents from acquiring excessive information by introducing randomization to the ex post efficient allocation rule in areas where the information’s accuracy increases most rapidly if an addition piece of information is acquired. In special cases, there exists an ex ante efficient mechanism that has a simple and appealing implementation: standard auctions with discrete bids.

Keywords: Auctions, Mechanism Design, Information Acquisition, Efficiency

JEL Classification: C70, D44, D82, D86

Suggested Citation

Li, Yunan, Efficient Mechanisms with Information Acquisition (June 23, 2017). PIER Working Paper No. 16-007, Available at SSRN: https://ssrn.com/abstract=2757692 or http://dx.doi.org/10.2139/ssrn.2757692

Yunan Li (Contact Author)

City University of Hong Kong (CityU) ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong

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