Collective decision through an informed mediator

Yunan Li; Xingtan Zhang

doi:10.1016/j.jet.2024.105817

Collective decision through an informed mediator

Yunan Li, Xingtan Zhang^*

^*Corresponding author for this work

Department of Economics and Finance

Research output: Journal Publications and Reviews › RGC 21 - Publication in refereed journal › peer-review

Abstract

An imperfectly informed mediator (or mechanism designer) must make a decision on behalf of a group of agents, who are privately informed about their valuations attached to the decision. The mediator chooses a mechanism before observing a signal about the agents' valuations and commits to truthfully using this information in the mechanism. We give a necessary and sufficient condition on the mediator's information under which the ex post efficient decision rule can be implemented by an ex ante budget balanced, dominant strategy incentive-compatible and ex post individually rational mechanism. In a large economy, we show that the amount of information that the mediator needs to know about each agent to achieve ex post efficiency is bounded as the number of agents grows to infinity.

© 2024 Elsevier Inc. All rights reserved.

Original language	English
Article number	105817
Journal	Journal of Economic Theory
Volume	218
Online published	9 Mar 2024
DOIs	https://doi.org/10.1016/j.jet.2024.105817
Publication status	Published - Jun 2024

Bibliographical note

Research Unit(s) information for this publication is provided by the author(s) concerned.

Funding

We thank the editor, Tilman B\u00F6rgers, an associate editor, and two referees for their constructive and insightful feedback. In addition, we thank Eduardo Azevedo, Vincent Glode, George Mailath, Katie Moon, Shri Santosh, Yangwei Song, Thomas Troeger, Ed Van Wesep, Jaime Zender, and seminar participants at various institutions and conferences for helpful comments. Zhang acknowledges financial support from the Capital Markets Program at University of Colorado Boulder. Any remaining errors are ours.

Research Keywords

Asymmetric information
Collective decision
Cross-subsidization mechanism
Provision of public goods

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abstract = "An imperfectly informed mediator (or mechanism designer) must make a decision on behalf of a group of agents, who are privately informed about their valuations attached to the decision. The mediator chooses a mechanism before observing a signal about the agents' valuations and commits to truthfully using this information in the mechanism. We give a necessary and sufficient condition on the mediator's information under which the ex post efficient decision rule can be implemented by an ex ante budget balanced, dominant strategy incentive-compatible and ex post individually rational mechanism. In a large economy, we show that the amount of information that the mediator needs to know about each agent to achieve ex post efficiency is bounded as the number of agents grows to infinity.{\textcopyright} 2024 Elsevier Inc. All rights reserved.",

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author = "Yunan Li and Xingtan Zhang",

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language = "English",

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AU - Li, Yunan

AU - Zhang, Xingtan

N1 - Research Unit(s) information for this publication is provided by the author(s) concerned.

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N2 - An imperfectly informed mediator (or mechanism designer) must make a decision on behalf of a group of agents, who are privately informed about their valuations attached to the decision. The mediator chooses a mechanism before observing a signal about the agents' valuations and commits to truthfully using this information in the mechanism. We give a necessary and sufficient condition on the mediator's information under which the ex post efficient decision rule can be implemented by an ex ante budget balanced, dominant strategy incentive-compatible and ex post individually rational mechanism. In a large economy, we show that the amount of information that the mediator needs to know about each agent to achieve ex post efficiency is bounded as the number of agents grows to infinity.© 2024 Elsevier Inc. All rights reserved.

AB - An imperfectly informed mediator (or mechanism designer) must make a decision on behalf of a group of agents, who are privately informed about their valuations attached to the decision. The mediator chooses a mechanism before observing a signal about the agents' valuations and commits to truthfully using this information in the mechanism. We give a necessary and sufficient condition on the mediator's information under which the ex post efficient decision rule can be implemented by an ex ante budget balanced, dominant strategy incentive-compatible and ex post individually rational mechanism. In a large economy, we show that the amount of information that the mediator needs to know about each agent to achieve ex post efficiency is bounded as the number of agents grows to infinity.© 2024 Elsevier Inc. All rights reserved.

KW - Asymmetric information

KW - Collective decision

KW - Cross-subsidization mechanism

KW - Provision of public goods

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M3 - RGC 21 - Publication in refereed journal

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JO - Journal of Economic Theory

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Collective decision through an informed mediator

Abstract

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Research Keywords

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