In many mechanism design problems in practice, often allocation externality exists (e.g., peer effects in student allocation, and post-license com- petition in oligopoly). Despite the practical importance, mechanism design with allocation externality has not been much explored in the literature, per- haps due to the tractability issue of the problem. In this paper, we propose a simple and tractable model of mechanism design with allocation externality. We characterize the optimal mechanism, which has a very simple form in the sense that it is identified by only a few parameters. This simplicity of the optimal mechanism is also useful to obtain comparative statics results.
Mechanism design; Allocation externality;
- C72: Noncooperative Games
- D82: Asymmetric and Private Information • Mechanism Design
- D86: Economics of Contract: Theory
Takuro Yamashita, and Roberto Sarkisian, “Large mechanism design with moment-based allocation externality”, TSE Working Paper, n. 21-1241, August 2021.
TSE Working Paper, n. 21-1241, August 2021