Abstract
In a mechanism, a designer may reveal some information to influence agents’ private
types in order to obtain more payoffs. In the literature, the information is usually
represented as random variables, the value of which are realized by the nature.
However, this representation of information may not be proper in some practical
cases. In this paper, we propose a type-adjustable mechanism where the information
sent by the designer is modeled as a solution of her optimization problem. From
the designer’s perspective, the probability distributions of agents’ private types
may be optimally controlled. By constructing a type-adjustable first-price sealedbid auction, we show that the seller may obtain more expected payoffs than what
she could obtain at most in the traditional optimal auction model. Interestingly, to
the satisfaction of all, each agent’s ex-ante expected payoffs may be increased too.
In the end, we compare the type-adjustable mechanism with other relevant models.
Key words: Mechanism design; Optimal auction; Bayesian implementation.
Abstract
In a mechanism, a designer may reveal some information to influence agents’ private
types in order to obtain more payoffs. In the literature, the information is usually
represented as random variables, the value of which are realized by the nature.
However, this representation of information may not be proper in some practical
cases. In this paper, we propose a type-adjustable mechanism where the information
sent by the designer is modeled as a solution of her optimization problem. From
the designer’s perspective, the probability distributions of agents’ private types
may be optimally controlled. By constructing a type-adjustable first-price sealedbid auction, we show that the seller may obtain more expected payoffs than what
she could obtain at most in the traditional optimal auction model. Interestingly, to
the satisfaction of all, each agent’s ex-ante expected payoffs may be increased too.
In the end, we compare the type-adjustable mechanism with other relevant models.
Key words: Mechanism design; Optimal auction; Bayesian implementation.
(post is archived)