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Working Papers (2019), ESSEC Business School

On the Informed Principal Model with Common Values

This paper reconsiders the general informed principal model with unilateral private information and common values. First, it identifies some fundamental properties of the Rothschild-Stiglitz-Wilson (RSW) allocation (i.e., the undominated for the principal allocation within the set of incentive compatible and individually rational for the agent type by type allocations). Based on these properties: (i) it constructs a more robust, and perhaps simpler, proof of the "if part" of Theorem 1 (i.e., the main result) of Maskin and Tirole (1992), and, (ii) it establishes that if the principal is restricted to offering mechanisms in which only she makes announcements (e.g., direct revelation mechanisms), then the conclusion of that theorem holds even in environments in which the RSW allocation is not interim efficient relative to any non-degenerate beliefs. Second, it provides a sufficient condition that allows for the complete charac-terisation of the set of equilibrium allocations even in environments in which single-crossing is not satisfied. Link to the article

DOSIS, A. (2019). On the Informed Principal Model with Common Values. ESSEC Business School.

Keywords : #Mechanism-design, #informed-principle