The Design of Ambiguous Mechanisms

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The Design of Ambiguous Mechanisms Abstract This paper explores the sale of an object to an ambiguity averse buyer. We show that the seller can increase his profit by using an ambiguous mechanism. That is, the seller can benefit from hiding certain features of the mechanism that he has committed to from the agent. We then characterize the profit maximizing mechanisms for the seller and characterize the conditions under which the seller can gain by employing an ambiguous mechanism. Terms of use: Documents in EconStor mayJEL-Code: C720, D440, D820.

On the Impossibility of Protecting Risk‐takers

“…For example, Bose and Renou () and Di Tillio et al . () characterised the optimal mechanisms when buyers are ambiguity averse and Carbajal and Ely () examine situations in which buyers are loss averse (with a piecewise linear function as in Köszegi and Rabin ()). All these articles assume that the utility function is piecewise linear or concave, so marginal utility of transfers is bounded away from zero.…”

Essays on mechanism design under non-Bayesian frameworks

“…We do not assume exogenous ambiguity in agents' beliefs, which is the biggest difference between the above papers and our work. Bose and Renou (2014) and Di Tillio et al (2017) contrast the above works in that ambiguity is endogenously engineered by the mechanism designer. Before the allocation stage, Bose and Renou (2014) let the mechanism designer communicate with agents via an ambiguous device, which generates multiple beliefs.…”

“…Di Tillio et al (2017) consider the problem of revenue maximization in a private value and independent belief auction. The seller commits to a simple mechanism, i.e., an allocation and transfer rule, but informs agents of a set of simple mechanisms.…”

“…In the current paper, ambiguity is engineered in a similar way to Di Tillio et al (2017). However, instead of studying how ambiguous mechanisms improve second-best revenues under independent beliefs, our paper studies when the first-best outcome in surplus extraction or implementation can be achieved without restricting attention to independent beliefs.…”

“…in a finite-type framework, the mechanism designer does not have multiple allocation rules to choose from. In a related paper, Di Tillio et al (2017) study how second-best revenue in an independent private value auction can be improved if the seller introduces ambiguity in both allocation and transfer rules. In fact, only introducing ambiguous transfers under their environment cannot improve the seller's revenue compared to an unambiguous mechanism, and thus ambiguous allocations play an important role.…”