Mechanism Design with Side Payments : Individual Rationality and Iterative Dominance

We investigate the collective decision problem with incomplete information and side payments. We show that for generic prior distributions, there exists a direct mechanism associated with the social choice function that satisfies budget balancing, incentive compatibility, and interim individual rationality. We consider the possibility of a risk-averse principal’s extracting the full surplus in agency problems with adverse selection. We also show that for generic prior distributions, there exists a modified direct mechanism associated with the virtual social choice function, which satisfies budget balancing and interim individual rationality, such that truth telling is the unique triple iteratively undominated message rule profile.本文フィルはリンク先を参照のこ