Three Essays In Mechanism Design

Microeconomic literature has shown an increasing interest in problems with asymmetric information. A general consensus from this section of the literature is that the introduction of an asymmetry in information affects the distribution of wealth between the different agents as well as the overall efficiency of the system. It is also generally thought that a mechanism designer can do better than to average over the information set or, alternatively, that communication has a positive value. The present research shows that these conclusions are very sensitive to changes in the assumptions of the models. The first essay analyzes a principal-agent model with moral hazard and adverse selection. It is shown that for a large class of environments communication has no value and that the principal cannot do better than to average over the different types of agents. In the second essay a principal-agent model with adverse selection is considered. Furthermore, it is assumed that both parties can observe ex-post a random variable correlated to the type of the agent. It is shown that in this case the principal can support the first best solution and that in expected value the distribution of wealth is not affected by the asymmetry of information. In the last essay a heterogeneous oligopoly model with imperfect monitoring is examined. The producers are assumed to only know their own production and the prices are taken to depend stochastically on output. Again, it is shown that despite this asymmetry in information the oligopolists can sustain the cooperative quantities for a large class of environments