Competing Mechanisms and Folk Theorems: Two Examples

Attar, Andrea, Campioni, Eloisa, Mariotti, Thomas and Piaser, Gwenaël (2019) Competing Mechanisms and Folk Theorems: Two Examples. TSE Working Paper, n. 19-1014, Toulouse

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We study competing-mechanism games under exclusive competition: principals
first simultaneously post mechanisms, after which agents simultaneously choose to
participate and communicate with at most one principal. In this setting, which is
common to competing-auction and competitive-search applications, we develop two
complete-information examples that question the relevance of the folk theorems for
competing-mechanism games documented in the literature. The first example shows
that there can exist pure-strategy equilibria in which some principal obtains a payoff
below her min-max payoff, computed over all principals' decisions. Thus folk-theoremlike
results may have to involve a bound on principals' payoffs that depends on the
spaces of messages available to the agents, and not only on the players' actions. The
second example shows that even this nonintrinsic approach is misleading when agents'
participation decisions are strategic: there can exist incentive-feasible allocations in
which principals obtain payoffs above their min-max payoffs, computed over arbitrary
spaces of mechanisms, but which cannot be supported in equilibrium.

Item Type: Monograph (Working Paper)
Language: English
Date: June 2019
Place of Publication: Toulouse
Uncontrolled Keywords: Competing Mechanisms, Folk Theorems, Exclusive Competition.
JEL codes: D82 - Asymmetric and Private Information
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse 1 Capitole
Site: UT1
Date Deposited: 05 Jun 2019 07:43
Last Modified: 05 Jun 2019 07:43

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