Abstract
If valuations are interdependent and agents observe their own allocation payoffs, then two-stage revelation mechanisms expand the set of implementable decision functions. In a two-stage revelation mechanism agents report twice. In the first stage - before the allocation is decided - they report their private signals. In the second stage - after the allocation has been made, but before final transfers are decided - they report their payoffs from the allocation. Conditions are provided under which an uninformed seller can extract (or virtually extract) the full surplus from a sale to privately informed buyers, in spite of the buyers’ signals being independent random variables.
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This research was started when I was visiting the Department of Applied Mathematics of the University of Venice, and continued while visiting the European University Institute in Florence. Their financial support is gratefully acknowledged.
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Mezzetti, C. Mechanism Design with Interdependent Valuations: Surplus Extraction. Economic Theory 31, 473–488 (2007). https://doi.org/10.1007/s00199-006-0104-8
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DOI: https://doi.org/10.1007/s00199-006-0104-8