Mechanism Design with Interdependent Valuations: Efficiency

Claudio Mezzetti -- University of North Carolina, Department of Economics, mezzetti@email.unc.edu

abstract

Agents' valuations are interdependent if they depend on the signals, or types, of all agents. Under the implicit assumption that agents cannot observe their outcome-decision payoffs, previous literature has shown that with interdependent valuations and independent signals efficient design is impossible. This paper shows that an efficient mechanism exists in an environment where first the final outcome (e.g., allocation of the goods) is determined, then the agents observe their own outcome-decision payoffs, and then final transfers are made.

KEYWORDS: Auctions, Efficiency, Interdependent Valuations, Mechanism Design.

JEL: D44, D82.