Robust Mechanisms: the curvature case
| Autor: | Vitor Farinha Luz, Paulo Klinger Monteiro, Vinicius Carrasco, Humberto Moreira |
|---|---|
| Rok vydání: | 2015 |
| Předmět: |
Mathematical optimization
Economics and Econometrics Computer Science::Computer Science and Game Theory Property (philosophy) Computer science Principal (computer security) 05 social sciences Optimal mechanism Principal–agent problem 050301 education Monotonic function Curvature Moment (mathematics) Nonlinear system Margin (machine learning) Robustness (computer science) 0502 economics and business Economics Robustness (economics) 0503 education Mathematical economics Nonlinear pricing 050205 econometrics Public finance |
| Popis: | This paper considers the problem of a Principal (she) who faces a privately informed agent (he) and only knows one moment of the type distribution. Preferences are non- linear in the allocation and the Principal maximizes her worst-case expected profits. A robustness property of the optimal mechanism imposes restrictions on the principal’s ex-post payoff function: conditional on the allocation being non-zero, ex-post payoffs are linear in the agent’s type. The robust mechanism entails exclusion of low types, distortions at the intensive margin and efficiency at the top. We show that, under some conditions, distortions in the optimal mechanism are decreasing in types. This monotonicity has relevant consequences for several applications discussed. Our charac- terization uses an auxiliary zero-sum game played by the Principal and an adversarial Nature who seeks to minimize her expected payoffs which also gives us a characteriza- tion of the worst-case distribution from the principal’s perspective. Applications of our framework to insurance provision, optimal taxation, non-linear pricing and regulation are discussed. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
|