Efficient Design with Interdependent Valuations

Jéhiel, Philippe; Moldovanu, Benny

doi:10.1111/1468-0262.00240

Cited by 385 publications

(297 citation statements)

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“…Bergemann and Välimäki (2002) show that when agents have private valuations of a good and acquire costly independent information, a Vickrey-Clarke-Groves mechanism (VCG; see Clarke 1971, Groves 1973) achieves regret-free (or ex-post) efficient allocation and an ex-ante efficient level of information acquisition. Under common valuations and independent signals, efficient mechanism design is also examined in a group of studies, including Dasgupta and Maskin (2000), Jehiel and Moldovanu (2001), and Perry and Reny (2002). With uncorrelated signals and under the assumption that deviations from equilibrium can be detected with positive probability, Mezzetti (2002) demonstrates that a mechanism that achieves ex-post efficient allocation with efficient exante information acquisition exists.…”

Section: Literature Reviewmentioning

confidence: 99%

Do Firms Invest in Forecasting Efficiently? The Effect of Competition on Demand Forecast Investments and Supply Chain Coordination

Shin

Tunca

2010

Operations Research

160

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We study the effect of downstream competition on incentives for demand forecast investments in supply chains. We show that with common pricing schemes, such as wholesale price or two-part tariffs, downstream firms under Cournot competition overinvest in demand forecasting. Analyzing the determinants of overinvestment, we demonstrate that under wholesale price contracts and two-part tariffs, total demand forecast investment can be very significant, and as a result, the supply chain can suffer substantial losses. We show that an increased number of competing retailers and uncertainty in consumer demand tend to increase inefficiency, whereas increased consumer market size and demand forecast costs reduce the loss in supply chain surplus. We identify the causes of inefficiency, and to coordinate the channel with forecast investments, we explore contracts in the general class of market-based contracts used in practice. When retailers' forecast investments are not observable, such a contract that employs an index-price can fully coordinate the supply chain. When forecast investments are observable to others, however, the retailers engage in an "arms race" for forecast investment, which can result in a significant increase in overinvestment and reduction in supply chain surplus. Furthermore, in that case, simple market-based contracts cannot coordinate the supply chain. To solve this problem, we propose a uniform-price divisiblegood auction-based contracting scheme, which can achieve full coordination when forecast investments are observable. We also demonstrate the desirable properties for implementability of our proposed coordinating contracting schemes, including incentive-compatible and reliable demand forecast information revelation by the retailers, and being regret-free.

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Section: Literature Reviewmentioning

confidence: 99%

Do Firms Invest in Forecasting Efficiently? The Effect of Competition on Demand Forecast Investments and Supply Chain Coordination

Shin

Tunca

2010

Operations Research

160

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“…Mirrlees' representation can as well be used for character-izing implementable allocation rules. For example, Jehiel et al (1999) and Jehiel and Moldovanu (2001) derive characterizations for auction environments with linear valuation functions. They show that existence and path-independence of certain integrals provides necessary and sufficient conditions for implementation.…”

Section: V( F (S) S) + P(s) ≥ V( F (T) S) + P(t)mentioning

confidence: 99%

Characterizing implementable allocation rules in multi-dimensional environments

2016

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We study characterizations of implementable allocation rules when types are multi-dimensional, monetary transfers are allowed, and agents have quasi-linear preferences over outcomes and transfers. Every outcome is associated with a valuation function that maps an agent's type to his value for this outcome. The set of types are assumed to be convex. Our main characterization theorem shows that allocation rules are implementable if and only if they are implementable on any two-dimensional convex subset of the type set. For finite sets of outcomes and continuous valuation functions, they are implementable if and only if they are implementable on every one-dimensional subset of the type set. This extends a characterization result by Saks and Yu (Weak monotonicity suffices for truthfulness on convex domains, pp [286][287][288][289][290][291][292][293] 2005) from models with linear valuation functions to arbitrary continuous valuation functions, and provides a simple proof of their result. Modeling multi-dimensional mechanism design the way we propose it here is of relevance whenever types are given by few parameters, while the set of possible outcomes is large, and when values for outcomes are non-linear functions in types.

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“…8 Note that in our case, the monotonicity of E(Y |S = s), which holds in Goeree and Offerman, is not satisfied for some interval of s. Nevertheless, the strategies as specified in (1) are equilibrium strategies in our case, because monotonicity of the entire strategy holds. 9 The size of the jump, at p = 4, is .75. . Thus, the lower dropout can be better news about the valuations (of the object) for the other bidders, so bidding by the remaining two bidders is more aggressive following a dropout between 3 and 4 than following a dropout between 4 and 5.…”

Section: The Analysismentioning

confidence: 99%

“…3 Also see Goeree and Offerman (2002) for an experimental testing of their model. Among other existing work, Jehiel and Moldovanu (2001) show that (ex post) efficiency is unlikely to be achieved in the interdependent valuation setting with multi-dimensional private information, though for the single good case Dasgupta and Maskin (2000) show that (constrained) efficiency is attainable. Zheng (2000) analyzes scoring rules based on which multi-dimensional bids are evaluated.…”

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confidence: 99%