Efficient Mechanism Design

19 Pages Posted: 27 Apr 1997

See all articles by Vijay Krishna

Vijay Krishna

Penn State University

Motty Perry

Hebrew University of Jerusalem - Center for the Study of Rationality; Pennsylvania State University, College of the Liberal Arts - Department of Economic

Date Written: May 1998

Abstract

We study Bayesian mechanism design in situations where agents' information may be multi-dimensional, concentrating on mechanisms that lead to efficient allocations. Our main result is that a generalization of the well-known Vickrey-Clarke-Groves mechanism maximizes the planner's "revenue" among all efficient mechanisms. This result is then used to study multiple object auctions in situations where bidders have privately known "demand curves" and extended to include situations with complementarities across objects or externalities across bidders. We also illustrate how the main result may be used to analyze the possibility of allocating both private and public goods efficiently when budget balance considerations are important. The generalized VCG mechanism, therefore, serves to unify many results in mechansim design theory.

JEL Classification: C73

Suggested Citation

Krishna, Vijay and Perry, Motty, Efficient Mechanism Design (May 1998). Available at SSRN: https://ssrn.com/abstract=64934 or http://dx.doi.org/10.2139/ssrn.64934

Vijay Krishna (Contact Author)

Penn State University ( email )

Kern 516
University Park, PA 16802-3306
United States
814-863-8543 (Phone)
814-863-4775 (Fax)

Motty Perry

Hebrew University of Jerusalem - Center for the Study of Rationality ( email )

Feldman Building
Givat-Ram
Jerusalem, 91904
Israel

Pennsylvania State University, College of the Liberal Arts - Department of Economic ( email )

524 Kern Graduate Building
University Park, PA 16802-3306
United States

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