First Best Implementation With Costly Information Acquisition

ZEW Discussion Paper No. 22-064 // 2022
ZEW Discussion Paper No. 22-064 // 2022

First Best Implementation With Costly Information Acquisition

We study mechanism design with flexible but costly information acquisition. There is a principal and four or more agents, sharing a common prior over the set of payoff-relevant states. The principal proposes a mechanism to the agents who can then acquire information about the state of the world by privately designing a signal device. As long as it is costless for each agent to acquire a signal that is independent from the state, we show that there exists a mechanism which allows the principal to implement any social choice rule at zero information acquisition cost to the agents.

Larionov, Daniil, Hien Pham, Takuro Yamashita and Shuguang Zhu (2022), First Best Implementation With Costly Information Acquisition, ZEW Discussion Paper No. 22-064, Mannheim.

Authors Daniil Larionov // Hien Pham // Takuro Yamashita // Shuguang Zhu