Decision Sciences
8 years ago

Mechanism Design Breakthrough: Agents' Beliefs Limit Full Rent Extraction

Journal of Economic Theory
The relevance of private information in mechanism design
Zvika Neeman

Paper Summary

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The article discusses how designing mechanisms can minimize the amount of private information agents keep. It shows that when agents' beliefs uniquely determine their preferences, mechanisms can extract all information rents. However, in cases where beliefs don't uniquely determine preferences, extracting all information rents becomes impossible, even in highly correlated environments.