Monopoly Regulation Under Relaxed Pareto Efficiency

Baron and Myerson (BM; 1982, Econometrica, 50(4), 911–930) propose an incentive-compatible, individually rational and ex ante socially optimal direct-revelation mechanism to regulate a monopolistic firm with unknown costs. Their mechanism is not ex post Pareto dominated by any other feasible direct-revelation mechanism. However, there also exist an uncountable number of feasible direct-revelation mechanisms that are not ex post Pareto dominated by the BM mechanism. To investigate whether the BM mechanism remains in the set of ex post undominated mechanisms when the Pareto axiom is slightly weakened, we introduce the ∈-Pareto dominance. This concept requires the relevant dominance relationships to hold in the support of the regulator’s beliefs everywhere except for a set of points of measure ∈, which can be arbitrarily small. We show that a modification of the BM mechanism which always equates the price to the marginal cost can ∈-Pareto dominate the BM mechanism at uncountably many regulatory environments, while it is never ∈-Pareto dominated by the BM mechanism at any regulatory environment.

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Ex-post IR Dynamic Auctions with Cost-per-Action Payments

Proceedings of the Twenty-Seventh International Joint Conference on Artificial Intelligence ◽

10.24963/ijcai.2018/70 ◽

2018 ◽

Cited By ~ 2

Author(s):

Weiran Shen ◽

Zihe Wang ◽

Song Zuo

Keyword(s):

Common Knowledge ◽

Incentive Compatibility ◽

Individual Rationality ◽

Incentive Compatible ◽

Dynamic Auctions ◽

Ex Post ◽

Ex Ante ◽

Ad Auctions ◽

The Cost ◽

General Reduction

Motivated by online ad auctions, we consider a repeated auction between one seller and many buyers, where each buyer only has an estimation of her value in each period until she actually receives the item in that period. The seller is allowed to conduct a dynamic auction but must guarantee ex-post individual rationality. In this paper, we use a structure that we call credit accounts to enable a general reduction from any incentive compatible and ex-ante individual rational dynamic auction to an approximate incentive compatible and ex-post individually rational dynamic auction with credit accounts. Our reduction obtains stronger individual rationality guarantees at the cost of weaker incentive compatibility. Surprisingly, our reduction works without any common knowledge assumption. Finally, as a complement to our reduction, we prove that there is no non-trivial auction that is exactly incentive compatible and ex-post individually rational under this setting.

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Incentive-Compatible Matching Mechanisms: Consistency with Various Stability Notions

American Economic Journal Microeconomics ◽

10.1257/mic.5.4.120 ◽

2013 ◽

Vol 5 (4) ◽

pp. 120-141 ◽

Cited By ~ 13

Author(s):

M. Bumin Yenmez

Keyword(s):

Incentive Compatibility ◽

Short Side ◽

Incentive Compatible ◽

Ex Post ◽

Matching Market ◽

Ex Ante ◽

One To One ◽

Stability Notions

I study the consistency of incentive compatibility with several stability notions for a one-to-one matching market with transfers. Ex post stability, studied in the matching literature, is too strong to be satisfied together with incentive compatibility. Therefore, I introduce weaker stability notions: ex ante stability and interim stability. Although ex ante stability is consistent with incentive compatibility when agents are ex ante identical or when the market is balanced, interim stability can only be satisfied when there is one agent on the short side of the market, as in auctions. Which stability is appropriate depends on when agents can block. (JEL C78, D44, D83)

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Misselling in Self-placement and Bank Resolution under BRRD2

European Company and Financial Law Review ◽

10.1515/ecfr-2020-0023 ◽

2020 ◽

Vol 17 (5) ◽

pp. 522-557

Author(s):

Ugo Malvagna ◽

Antonella Sciarrone Alibrandi

Keyword(s):

Investor Protection ◽

Regulatory Environment ◽

Bank Resolution ◽

Ex Post ◽

Retail Investors ◽

Ex Ante ◽

Effective Integration

Abstract1. Bank crises and the treatment of retail investors in the BRRD era. – 2. The problem of misselling in the context of self-placement of securities issued by banks. – 3. The (loose) interplay between investor protection and bank resolution in the current regulatory environment. – 4. The Single Resolution Board’s policy on the treatment of retail clients’ holdings for the purpose of MREL eligibility. – 5. Art. 44 a BRRD 2 on the «selling of subordinated eligible liabilities to retail clients». – 6. The need for a more effective integration between investor protection and bank resolution discipline: from an ex-post to an ex-ante approach. The role of product governance under MiFID 2. – 7. Concluding remarks.

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Rules without Commitment: Reputation and Incentives

The Review of Economic Studies ◽

10.1093/restud/rdab006 ◽

2021 ◽

Author(s):

Alessandro Dovis ◽

Rishabh Kirpalani

Keyword(s):

Optimal Design ◽

Large Class ◽

Policy Maker ◽

Time Inconsistency ◽

Optimal Rule ◽

Incentive Compatible ◽

Ex Post ◽

Ex Ante ◽

The One ◽

Good Behaviour

AbstractThis article studies the optimal design of rules in a dynamic model when there is a time inconsistency problem and uncertainty about whether the policy maker can commit to follow the rule ex post. The policy maker can either be a commitment type, which can always commit to follow rules, or an optimizing type, which sequentially decides whether to follow rules or not. This type is unobservable to private agents, who learn about it through the actions of the policy maker. Higher beliefs that the policy maker is the commitment type (i.e. the policy maker’s reputation) help promote good behaviour by private agents. We show that in a large class of economies, preserving uncertainty about the policy maker’s type is preferable from an ex ante perspective. If the initial reputation is not too high, the optimal rule is the strictest one that is incentive compatible for the optimizing type. We show that reputational considerations imply that the optimal rule is more lenient than the one that would arise in a static environment. Moreover, opaque rules are preferable to transparent ones if reputation is high enough.

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