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Efficient Design with Interdependent Valuations
Author(s) -
Jehiel Philippe,
Moldovanu Benny
Publication year - 2001
Publication title -
econometrica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 16.7
H-Index - 199
eISSN - 1468-0262
pISSN - 0012-9682
DOI - 10.1111/1468-0262.00240
Subject(s) - congruence (geometry) , common value auction , allocative efficiency , generality , incentive compatibility , mathematical economics , constraint (computer aided design) , monotonic function , social choice theory , mechanism design , mathematics , economics , interdependence , mathematical optimization , computer science , microeconomics , incentive , mathematical analysis , geometry , management , political science , law
We study efficient, Bayes‐Nash incentive compatible mechanisms in a social choice setting that allows for informational and allocative externalities. We show that such mechanisms exist only if a congruence condition relating private and social rates of information substitution is satisfied. If signals are multi‐dimensional, the congruence condition is determined by an integrability constraint, and it can hold only in nongeneric cases where values are private or a certain symmetry assumption holds. If signals are one‐dimensional, the congruence condition reduces to a monotonicity constraint and it can be generically satisfied. We apply the results to the study of multi‐object auctions, and we discuss why such auctions cannot be reduced to one‐dimensional models without loss of generality.