Game Theory and Mathematical Economics Research Seminar
Lecturer:
Prof. Thomas Hemmer (Rice University)
Title:
When Markets Give You Lemons...
Abstract:
We establish an equivalence between disclosure games and a class of mechanism design problems in which an arbitrator negotiates trade between an informed seller and uninformed buyer. The arbitrator elicits private communication from the seller, mandates a public disclosure to the buyer, and selects a price at which goods are exchanged. To elicit truth from the seller, the arbitrator must commit to a public disclosure policy and pricing schedule that would have formed a disclosure equilibrium in the arbitrator’s absence. Thus every optimal mechanism is a disclosure equilibrium, and every disclosure equilibrium is an incentive compatible mechanism. This equivalence holds whether or not disclosures are verifiable, information is uncertainly endowed, disclosures are costly, or exchange is forced. Our result implies that the set of all disclosure games is a subset of all mechanism design problems, and the value of binding arbitration (e.g., regulation) can be benchmarked against this subset.
Location:
Eilan Hall, Feldman Building, Second Floor, Edmond Safra Campus.