Abstract:This paper deals with the optimal design of resource allocation mechanisms in the presence of asymmetric information. A buyer's valuation function is allowed to depend on the characteristics of other buyers as well as his own and sufficient conditions are provided under which the seller can extract the full surplus from the buyers in an "ex post Nash" equilibrium. The result is then applied to the important problem of optimal auction design.
“…4 Persico [2000] (following Matthews [1984] ) used such a model to argue that players have a positive marginal bene…t from acquiring better information (which corresponds to choosing a higher i ) as throughout as our solution concept. 2 For n > 2, this Proposition applies to an auction where the highest bidder wins, and pays a price equal to the lowest bid submitted.…”
Consider an estimate of the common value of an auctioned asset that is symmetric in the bidders' types. Such an estimate can be represented solely in terms of the order statistics of those types. This representation forms the basis for a pricing rule yielding truthful bidding as an equilibrium, whether bidders' types are a¢ liated or independent. We highlight the link between the estimator and full surplus extraction, providing a necessary and su¢ cient condition for ex-post full surplus extraction, including the possibility of independent types. The results o¤er sharp insights into the strengths and limits of simple auctions by identifying the source of informational rents in such environments.Harstad acknowledges hospitable accommodation by the Fuqua School of Business, Duke University, and the Olin School of Business, Washington University in St. Louis, during parts of this research. We are grateful for comments and suggestions from Richard McLean and Jeroen Swinkels.
“…4 Persico [2000] (following Matthews [1984] ) used such a model to argue that players have a positive marginal bene…t from acquiring better information (which corresponds to choosing a higher i ) as throughout as our solution concept. 2 For n > 2, this Proposition applies to an auction where the highest bidder wins, and pays a price equal to the lowest bid submitted.…”
Consider an estimate of the common value of an auctioned asset that is symmetric in the bidders' types. Such an estimate can be represented solely in terms of the order statistics of those types. This representation forms the basis for a pricing rule yielding truthful bidding as an equilibrium, whether bidders' types are a¢ liated or independent. We highlight the link between the estimator and full surplus extraction, providing a necessary and su¢ cient condition for ex-post full surplus extraction, including the possibility of independent types. The results o¤er sharp insights into the strengths and limits of simple auctions by identifying the source of informational rents in such environments.Harstad acknowledges hospitable accommodation by the Fuqua School of Business, Duke University, and the Olin School of Business, Washington University in St. Louis, during parts of this research. We are grateful for comments and suggestions from Richard McLean and Jeroen Swinkels.
“…Schmeidler and follow up papers model large games by assuming a continuum of players, while the current paper models it asymptotically by letting the number of players grow to 10 See Cremer and McLean (1985), Green and La¤ont (1987) and follow up literatures, for earlier (weaker) versions of the concept. in…nity.…”
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Partially-Speci…ed Large Games
Ehud KalaiAbstract. The sensitivity of Nash equilibrium to strategic and informational details presents a di¢ culty in applying it to games which are not fully speci…ed.Structurally-robust Nash equilibria are less sensitive to such details. Moreover, they arrise naturally in important classes of games that have many semianonymous players.The paper describes this condition and its implications.
“…The revelation principle for ex post optimality states that there is a direct mechanism in which no agent will have an incentive to change its strategy after the private information of the other agents are revealed [3]. This principle has been discussed under various names in different contexts by several authors: Harris and Townsend have examined a large class of allocation problems with asymmetric information based on a notion of "full-information" optimality which is equivalent to "ex post" optimality [2].…”
Section: Introductionmentioning
confidence: 99%
“…In [3], ex post Nash equilibrium (ex post NE) is employed to deal with the optimal design of mechanisms of resource allocations. Bergemann and Morris justify employing ex post NE as a solution concept in which no agent would have an incentive to change its strategy even if it were to be informed of the true type profile of the other agents; a related justification for ex post NE, discussed by the same authors, is the distinguished feature of lack of regret in this type of equilibrium, which does not hold for Bayesian Nash equilibrium (BNE) in general [4].…”
Abstract:We employ the solution concept of ex post Nash equilibrium to predict the interaction of a finite number of agents competing in a finite number of basic games simultaneously. The competition is called a multi-game. For each agent, a specific weight, considered as private information, is allocated to each basic game representing its investment in that game and the utility of each agent for any strategy profile is the weighted sum, i.e., convex combination, of its utilities in the basic games. Multi-games can model decision making in multi-environments in a variety of circumstances, including decision making in multi-markets and decision making when there are both material and social utilities for agents as, we propose, in the Prisoner's Dilemma and the Trust Game. Given a set of pure Nash equilibria, one for each basic game in a multi-game, we construct a pure Bayesian Nash equilibrium for the multi-game. We then focus on the class of so-called uniform multi-games in which each agent is constrained to play in all games the same strategy from an action set consisting of a best response per game. Uniform multi-games are equivalent to multi-dimensional Bayesian games where the type of each agent is a finite dimensional vector with non-negative components. A notion of pure type-regularity for uniform multi-games is developed and it is shown that a multi-game that is pure type-regular on the boundary of its type space has a pure ex post Nash equilibrium which is computed in constant time with respect to the number of the types and is independent of prior probability distributions. We then develop an algorithm, linear in the number of types of the agents, which tests if a multi-game is pure type-regular on the boundary of its type space in which case it returns a pure ex post Nash equilibrium for the multi-game.
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