Meng, Dawen and Tian, Guoqiang (2014): Collusion-Proof Mechanism Design in Two-Agent Nonlinear Pricing Environments.
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Abstract
This paper studies the cost requirement for two-agent collusion-proof mechanism design. Unlike the existing results for general environments with three or more agents, it is shown that collusive behavior cannot be prevented freely in two-agent nonlinear pricing environments with correlated types. Reporting manipulation calls for distortions away from the first-best efficiency, and arbitrage calls for further distortion. Moreover, we show that the distortionary patterns are quite different for positive and negative correlations. The second-best outcome is attainable as negative correlation is vanishing, while the limit of collusion-proof efficiency is strictly lower than the second-best level as positive correlation goes to zero. Allowing arbitrage therefore breaks the continuity between correlated and uncorrelated types.
Item Type: | MPRA Paper |
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Original Title: | Collusion-Proof Mechanism Design in Two-Agent Nonlinear Pricing Environments |
Language: | English |
Keywords: | Nonlinear pricing, collusion-proof, mechanism design, arbitrage, correlation |
Subjects: | D - Microeconomics > D4 - Market Structure, Pricing, and Design > D42 - Monopoly D - Microeconomics > D6 - Welfare Economics > D62 - Externalities D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information ; Mechanism Design |
Item ID: | 57931 |
Depositing User: | Guoqiang Tian |
Date Deposited: | 18 Aug 2014 09:42 |
Last Modified: | 29 Sep 2019 22:03 |
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URI: | https://mpra.ub.uni-muenchen.de/id/eprint/57931 |