Skip to main content
SpringerLink
Log in

Perfect robust implementation by private information design

  • Research Article
  • Published:
Economic Theory Aims and scope Submit manuscript

Abstract

This paper studies the general principal-agent framework in which the principal aims to implement his first-best action that is monotone in the unknown state. The principal privately selects a signal structure of the agent whose payoff depends on the principal’s action, the state, and the privately known type. The agent privately observes the generated signal and reports it to the principal, who takes action. We show that by randomizing between two perfectly informative signal structures, the principal can elicit perfect information from the agent about the state and implement his first-best action regardless of the agent’s type. As to the economic application, we consider the bilateral trade model with non-quasilinear preferences and private multi-dimensional information of the buyer, and show that the seller can extract full surplus by privately designing the buyer’s signal structures.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Antsygina, A., Teteryatnikova, M.: Optimal information disclosure in contests with stochastic prize valuations. Econ. Theory 75, 743–780 (2023)

    Article  Google Scholar 

  • Bergemann, D., Pesendorfer, M.: Information structures in optimal auctions. J. Econ. Theory 137, 580–609 (2007)

    Article  Google Scholar 

  • Bergemann, D., Morris, S., Heumann, T.: Screening with persuasion. Working Paper (2023)

  • Blume, A., Board, O., Kawamura, K.: Noisy talk. Theor. Econ. 2, 395–440 (2007)

    Google Scholar 

  • Blume, A., Lai, E., Lim, M.: Eliciting private information with noise: the case of randomized response. Games Econ. Behav. 113, 356–380 (2019)

    Article  Google Scholar 

  • Chakraborty, A., Harbaugh, R.: Persuasion by cheap talk. Am. Econ. Rev. 100, 2361–2382 (2010)

    Article  Google Scholar 

  • Crawford, V., Sobel, J.: Strategic information transmission. Econometrica 50, 1431–1451 (1982)

    Article  Google Scholar 

  • Crémer, J., McLean, R.P.: Full extraction of the surplus in Bayesian and dominant strategy auctions. Econometrica 56, 1247–1257 (1988)

    Article  Google Scholar 

  • Dworczak, P., Kominers, S.D., Akbarpour, M.: Redistribution through markets. Econometrica 89, 1665–1698 (2021)

    Article  Google Scholar 

  • Ederer, F., Holden, R., Meyer, M.: Gaming and strategic opacity in incentive provision. Rand J. Econ. 49, 819–854 (2018)

    Article  Google Scholar 

  • Esö, P., Szentes, B.: Optimal information disclosure in auctions. Rev. Econ. Stud. 74, 705–731 (2007)

    Article  Google Scholar 

  • Fu, H., Haghpanah, N., Hartline, J., Kleinberg, R.: The full surplus extraction from samples. J. Econ. Theory 193, 105230 (2021)

    Article  Google Scholar 

  • Goltsman, M., Hörner, J., Pavlov, G., Squintani, F.: Mediation, arbitration and negotiation. J. Econ. Theory 144, 1397–1420 (2009)

    Article  Google Scholar 

  • Hadjisavvas, N., Komlòsi, S., Schaible, S.: Handbook of Generalized Convexity and Generalized Monotonicity. Springer, Boston (2005)

    Book  Google Scholar 

  • Heifetz, A., Neeman, Z.: On the generic (im)possibility of full surplus extraction in mechanism design. Econometrica 74, 213–233 (2006)

    Article  Google Scholar 

  • Ingersoll, J.: Theory of Financial Decision Making. Rowman and Littlefield Publishers, Totowa (1987)

    Google Scholar 

  • Ivanov, M., Sam, A.: Cheap talk with private signal structures. Games Econ. Behav. 132, 288–304 (2022)

    Article  Google Scholar 

  • Ivanov, M.: Optimal monotone signals in Bayesian persuasion mechanisms. Econ. Theory 72, 955–1000 (2021)

    Article  Google Scholar 

  • Ivanov, M.: Dynamic learning and strategic communication. Int. J. Game Theory 45, 627–653 (2016)

    Article  Google Scholar 

  • Ivanov, M.: Dynamic information revelation in cheap talk. The B.E. J. Theor. Econ. 15, 251–275 (2015)

    Article  Google Scholar 

  • Ivanov, M.: Communication via a strategic mediator. J. Econ. Theory 145, 869–884 (2010)

    Article  Google Scholar 

  • Johnson, J., Myatt, D.: On the simple economics of advertising, marketing, and product design. Am. Econ. Rev. 93, 756–784 (2006)

    Article  Google Scholar 

  • Krähmer, D.: Information disclosure and the full surplus extraction in mechanism design. J. Econ. Theory 187, 105020 (2020)

    Article  Google Scholar 

  • Krähmer, D.: Information design and strategic communication. Am. Econ. Rev: Insights 3, 51–66 (2021)

    Google Scholar 

  • Krishna, V.: Auction Theory, 2nd edn. Elsevier Academic Press, Boston (2009)

    Google Scholar 

  • Larionov, D., Pham, H., Yamashita, T.: First best implementation with costly information acquisition, Working Paper (2021)

  • Lewis, T., Sappington, D.: Supplying information to facilitate price discrimination. Int. Econ. Rev. 35, 309–327 (1994)

    Article  Google Scholar 

  • Li, H., Shi, X.: Discriminatory information disclosure. Am. Econ. Rev. 107, 3363–85 (2017)

    Article  Google Scholar 

  • Lipnowski, E., Ravid, D.: Cheap talk with transparent motives. Econometrica 88, 1631–1660 (2020)

    Article  Google Scholar 

  • McAfee, P., Reny, P.: Correlated information and mechanism design. Econometrica 60, 395–421 (1992)

    Article  Google Scholar 

  • McKinsey & Company: How companies spend their money: a McKinsey global survey, McKinsey Q (2007)

  • Myerson, R.: Optimal auction design. Math. Oper. Res. 6, 58–73 (1981)

    Article  Google Scholar 

  • Pastrian, N.: Surplus extraction with behavioral types. Working paper (2021)

  • Quah, J., Strulovici, B.: Aggregating the single crossing property. Econometrica 80, 2333–2348 (2012)

    Article  Google Scholar 

  • Saak, A.: The optimal private information in single unit monopoly. Econ. Lett. 91, 267–272 (2006)

    Article  Google Scholar 

  • Shannon, C.: Communication theory of secrecy systems. Bell Syst. Tech. J. 28, 656–715 (1949)

    Article  Google Scholar 

  • Silva, F., Figueroa, N., Jara, R.: Communication through biased intermediators. Working Paper (2023)

  • Watson, J.: Information transmission when the informed party is confused. Games Econ. Behav. 12, 143–161 (1996)

    Article  Google Scholar 

  • Zhu, S.: Private disclosure with multiple agents. J. Econ. Theory 212, 105705 (2023)

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Department of Economics, McMaster University, 1280 Main Street, Hamilton, ON, L8S 4M4, Canada

    Maxim Ivanov

Authors
  1. Maxim Ivanov
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Maxim Ivanov.

Additional information

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

I am thankful to the Associate Editor and the anonymous referee for their insightful comments. I am also grateful to Kalyan Chatterjee, Mikhail Drugov, Seungjin Han, Peicong Hu, Vijay Krishna, Ming Li, Wooyoung Lim, Elliot Lipnowski, Vitor Farinha Luz, Tatiana Mayskaya, Alan Miller, Alessandro Pavan, Sergei Severinov, Joel Sobel, Chen Zhao, Charles Zheng, and the audiences at Concordia University, Western University, University of British Columbia, Canadian Economic Theory Conference 2022, Canadian Economic Association Meetings 2022, Stony Brook International Conference on Game Theory 2022, EEA-ESEM 2022 Conference, Econometric Society European Winter Meeting 2022, FES-ICEF-NES seminar, and CUHK-HKU-HKUST Joint Theory Seminar for helpful comments. A part of this work was written while I visited the University of Toronto. I especially thank Heski Bar-Isaac for hospitality and insightful discussions. This work was supported by the Canadian Social Sciences and Humanities Research Council (SSHRC) Insight Grant 435-2022-0137. All errors are mine.

Rights and permissions

Springer Nature or its licensor (e.g. a society or other partner) holds exclusive rights to this article under a publishing agreement with the author(s) or other rightsholder(s); author self-archiving of the accepted manuscript version of this article is solely governed by the terms of such publishing agreement and applicable law.

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Ivanov, M. Perfect robust implementation by private information design. Econ Theory (2024). https://doi.org/10.1007/s00199-023-01548-3

Download citation

  • Received:

  • Accepted:

  • Published:

  • DOI: https://doi.org/10.1007/s00199-023-01548-3

Keywords

JEL Classification

Search

Navigation