October 4, 2016, 11:00–12:30
Toulouse
Room MS 001
Economic Theory Seminar
Abstract
A principal can relax the participation constraints of the agents by designing the (otherwise off the equilibrium path) beliefs following disagreement using a mediation device that, with a small probability, manipulates the messages received from the agents to originate spurious rejections that are correlated with their announcements. The participation constraints can be further relaxed if the mediation device is also used as a joint randomization device that is designed to punish a genuine rejector. Applications to collusion under private information are provided.