On Competing Mechanisms under Exclusive Competition

We study games in which several principals design incentive schemes in the presence of privately informed agents. Competition is exclusive: each agent can participate with at most one principal, and principal-agents corporations are isolated. We analyze the role of standard incentive compatible mechanisms in these contexts. First, we provide a clarifying example showing how incentive compatible mechanisms fail to completely characterize equilibrium outcomes even if we restrict to pure strategy equilibria. Second, we show that truth-telling equilibria are robust against unilateral deviations toward arbitrary mechanisms. We then consider the single agent case and exhibit sufficient conditions for the validity of the revelation principle

Competing mechanisms and folk fheorems: two examples

We study competing-mechanism games under exclusive competition: principals first simultaneously post mechanisms, after which agents simultaneously choose to participate and communicate with at most one principal. In this setting, which is common to competing-auction and competitive-search applications, we develop two complete-information examples that question the relevance of the folk theorems for competing-mechanism games documented in the literature. The first example shows that there can exist pure-strategy equilibria in which some principal obtains a payoff below her min-max payoff, computed over all principals' decisions. Thus folk-theoremlike results may have to involve a bound on principals' payoffs that depends on the spaces of messages available to the agents, and not only on the players' actions. The second example shows that even this nonintrinsic approach is misleading when agents' participation decisions are strategic: there can exist incentive-feasible allocations in which principals obtain payoffs above their min-max payoffs, computed over arbitrary spaces of mechanisms, but which cannot be supported in equilibrium

On Competing Mechanisms under Exclusive Competition

We study games in which several principals design mechanisms in the presence of privately informed agents. Competition is exclusive: each type of each agent can participate with at most one principal and meaningfully communicate only with him. Exclusive competition is at the centre stage of recent analyses of markets with private information. Economic models of exclusive competition restrict principals to use standard direct mechanisms, which induce truthful revelation of agents’ exogenous private information. This paper investigates the rationale for this restriction. We provide two results. First, we construct an economic example showing that direct mechanisms fail to completely characterize equilibrium outcomes even if we restrict to pure strategy equilibria. Second, we show that truth-telling strongly robust equilibrium outcomes survive against principals’ unilateral deviations toward arbitrary mechanisms