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Information Acquisition and Efficient Mechanism Design

Dirk Bergemann and Juuso Välimäki
Econometrica
Vol. 70, No. 3 (May, 2002), pp. 1007-1033
Published by: Econometric Society
Stable URL: http://www.jstor.org/stable/2692306
Page Count: 27
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Information Acquisition and Efficient Mechanism Design
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Abstract

We consider a general mechanism design setting where each agent can acquire (covert) information before participating in the mechanism. The central question is whether a mechanism exists that provides the efficient incentives for information acquisition ex-ante and implements the efficient allocation conditional on the private information ex-post. It is shown that in every private value environment the Vickrey-Clark-Groves mechanism guarantees both ex-ante as well as ex-post efficiency. In contrast, with common values, ex-ante and ex-post efficiency cannot be reconciled in general. Sufficient conditions in terms of sub- and supermodularity are provided when (all) ex-post efficient mechanisms lead to private under- or over-acquisition of information.

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