Abstract

This paper studies mechanism design with limited commitment where agents have persistent correlated types over the infinite horizon. The mechanism designer now faces the informed-principal problem in addition to usual issues with i.i.d. types. With an infinite horizon and nondurable good, there is always an equilibrium where all types of mechanism designer (private information on the type distribution of agents) pool together, and the ex-ante optimality depends on the cost of agents’ gaming the system. The paper also shows sufficient conditions for obtaining the full-commitment solution with limited commitment.

Full Text
Published version (Free)

Talk to us

Join us for a 30 min session where you can share your feedback and ask us any queries you have

Schedule a call