Ambiguous beliefs and mechanism design

Bodoh-Creed, Aaron

doi:10.1016/j.geb.2012.03.002

Cited by 83 publications

(34 citation statements)

References 14 publications

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“…A communication device is ambiguous if it specifies a (non-singleton) set of probability systems. 4 Note that if we change the payoff of 3 to a payoff of 3 − ε with ε > 0 small enough, all our results go through and f is the unique ex-post efficient social choice function. 5 As Section 6 demonstrates, ambiguity at the allocation stage does not help in implementing f .…”

Section: An Introductory Examplementioning

confidence: 70%

Mechanism Design With Ambiguous Communication Devices

Bose

Renou

2014

Econometrica

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This paper considers mechanism design problems in environments with ambiguitysensitive individuals. The novel idea is to introduce ambiguity in mechanisms so as to exploit the ambiguity sensitivity of individuals. We prove a revelation principle for the partial implementation of social choice functions by ambiguous mechanisms.We then revisit the classical monopolistic screening problem and show that ex-post full surplus extraction is possible, even when there is no ex-ante ambiguity.

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Section: An Introductory Examplementioning

confidence: 70%

Mechanism Design With Ambiguous Communication Devices

Bose

Renou

2014

Econometrica

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“…The literature on mechanism design with risk-averse or ambiguity-averse agents (e.g. Maskin and Riley, 1984;Bose et al, 2006;Bodoh-Creed, 2012) has explored various different insurance properties. As the following result shows, an insurance property is also useful for a characterization of economic outcomes that can be implemented if agents care about intentions.…”

Section: Possibility Resultsmentioning

confidence: 99%

“…If the mechanism designer is interested in expected revenues, this is not a problem. For instance, Bose et al (2006) and Bodoh-Creed (2012) use the same construction for models with ambiguity-averse agents, in which the agents and the designer act on the basis of different prior distributions. The construction then has the potential to increase expected revenues without hurting the agents, which can make mechanisms with insurance optimal.…”

Section: Possibility Resultsmentioning

confidence: 99%

Mechanism Design and Intentions

Bierbrauer

Netzer

2016

SSRN Journal

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We introduce intention-based social preferences into a mechanism design framework with independent private values and quasilinear payoffs. For the case where the designer has no information about the intensity of social preferences, we provide conditions under which mechanisms which have been designed under the assumption that agents are selfish can still be implemented. For the case where precise information about social preferences is available, we show that any tension between efficiency, incentive-compatibility, and voluntary participation may disappear. Impossibility results such as the one by Myerson and Satterthwaite (1983) are then turned into possibility results. We also provide a systematic account of the welfare implications of kindness sensations.

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“…approach is also used by Lo (1998), Levin and Ozdenoren (2004), Bose et al (2006), andBodoh-Creed (2012) to study auctions with ambiguity-averse bidders. Bade (2011b) uses this approach, too, in order to establish the existence of equilibria in games of multidimensional political competition.…”

Section: Ambiguity In Auditingmentioning

confidence: 99%

The fog of fraud – Mitigating fraud by strategic ambiguity

Lang

Wambach

2013

Games and Economic Behavior

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Most insurance companies publish few data on the occurrence and detection of insurance fraud.This stands in contrast to the previous literature on costly state verification, which has shown that it is optimal to commit to an auditing strategy. The credible announcement of thoroughly auditing claim reports is a powerful deterrent. Yet, we show that uncertainty about fraud detection can be an effective strategy to deter ambiguity-averse agents from reporting false insurance claims.If, in addition, the auditing costs of the insurers are heterogeneous, it can be optimal not to commit, because committing to a fraud-detection strategy eliminates the ambiguity. Thus, strategic ambiguity can be an equilibrium outcome in the market. Even competition does not force firms to provide the relevant information. This finding is also relevant in other auditing settings, like tax enforcement.JEL classifications: D8, K4

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Ambiguous beliefs and mechanism design

Cited by 83 publications

References 14 publications

Mechanism Design With Ambiguous Communication Devices

Mechanism Design With Ambiguous Communication Devices

Mechanism Design and Intentions

The fog of fraud – Mitigating fraud by strategic ambiguity

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