Uncertainty and robustness of surplus extraction
This paper studies a robust version of the classic surplus extraction problem, in which the designer knows only that the beliefs of each type belong to some set, and designs mechanisms that are suitable for all possible beliefs in that set. We derive necessary and sufficient conditions for full extraction in this setting, and show that these are natural set-valued analogues of the classic convex independence condition identified by Crémer and McLean (1985, 1988). We show that full extraction is neither generically possible nor generically impossible, in contrast to the standard setting in which full extraction is generic. When full extraction fails, we show that natural additional conditions can restrict both the nature of the contracts a designer can offer and the surplus the designer can obtain.
Duke Scholars
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- Economic Theory
- 3803 Economic theory
- 3801 Applied economics
- 1499 Other Economics
- 1401 Economic Theory
Citation
Published In
DOI
EISSN
ISSN
Publication Date
Volume
Related Subject Headings
- Economic Theory
- 3803 Economic theory
- 3801 Applied economics
- 1499 Other Economics
- 1401 Economic Theory