Efficient Design with Interdependent Valuations

Philippe Jehiel & Benny Moldavanu

Published version: Econometrica, Volume 69: Issue 5, 1237-1259, 2001

Note that the published version of this article is significantly different from the version on this website.

"We study efficient, Bayes-Nash incentive compatible mechanisms in a social choice setting that allows for informational and allocative externalities. We show that such mechanisms exist only if a congruence condition relating private and social rates of information substitution is satisfied. If signals are multi-dimensional, the congruence condition is determined by an integrability constraint, and it can hold only in nongeneric cases where values are private or a certain symmetry assumption holds. If signals are one-dimensional, the congruence condition reduces to a monotonicity constraint and it can be generically satisfied. We apply the results to the study of multi-object auctions, and we discuss why such auctions cannot be reduced to one-dimensional models without loss of generality."

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