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Competing Mechanisms and Folk Theorems: Two Examples

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Abstract
We study competing-mechanism games under exclusive competition: principals first simultaneously post mechanisms, then 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 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-theorem 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' available 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.

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  • Andrea Attar & Eloisa Campioni & Thomas Mariotti & Gwenael Piaser, 2019. "Competing Mechanisms and Folk Theorems: Two Examples," CEIS Research Paper 460, Tor Vergata University, CEIS, revised 06 Jun 2019.
    • Handle: RePEc:rtv:ceisrp:460
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    Cited by:

    1. Attar, Andrea & Campioni, Eloisa & Mariotti, Thomas & Pavan, Alessandro, 2021. "Keeping the Agents in the Dark: Private Disclosures in Competing Mechanisms," TSE Working Papers 21-1227, Toulouse School of Economics (TSE), revised Dec 2023.
    2. Attar, Andrea & Campioni, Eloisa & Piaser, Gwenaël, 2019. "Private communication in competing mechanism games," Journal of Economic Theory, Elsevier, vol. 183(C), pages 258-283.
    3. Han, Seungjin, 2022. "General competing mechanism games with strategy-proof punishment," Journal of Mathematical Economics, Elsevier, vol. 102(C).
    4. Attar, Andrea & Campioni, Eloisa & Piaser, Gwenaël, 2023. "Equilibrium (non-)existence in games with competing principals," Economics Letters, Elsevier, vol. 222(C).
    5. Seungjin Han, 2020. "Quasi Ex-Post Equilibrium in Competing Mechanisms," Department of Economics Working Papers 2020-11, McMaster University.
    6. Alberto Bucci & Lorenzo Carbonari & Monia Ranalli & Giovanni Trovato, 2019. "Health and Development," CEIS Research Paper 470, Tor Vergata University, CEIS, revised 24 Mar 2021.

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    More about this item

    Keywords

    Competing Mechanisms; Folk Theorems; Exclusive Competition;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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