Publication Type

Journal Article

Publication Date

11-2012

Abstract

We consider the robustness of extensive form mechanisms to deviations from common knowledge about the state of nature, which we refer to as information perturbations. First, we show that even under arbitrarily small information perturbations the Moore-Repullo mechanism does not yield (even approximately) truthful revelation and that in addition the mechanism has sequential equilibria with undesirable outcomes. More generally, we prove that any extensive form mechanism is fragile in the sense that if a non-Maskin monotonic social objective can be implemented with this mechanism, then there are arbitrarily small information perturbations under which an undesirable sequential equilibrium also exists. Finally, we argue that outside options can help improve efficiency in asymmetric information environments, and that these options can be thought of as reflecting ownership of an asset.

Keywords

Information, ownership, information perturbations

Discipline

Economic Theory

Research Areas

Economic Theory

Publication

Quarterly Journal of Economics

Volume

127

Issue

4

First Page

1843

Last Page

1881

ISSN

0033-5533

Identifier

10.1093/qje/qjs026

Publisher

Oxford University Press (OUP): Policy E - Oxford Open Option D - RCUK

Copyright Owner and License

Authors

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Additional URL

http://doi.org/10.1093/qje/qjs026

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