Template-Type: ReDIF-Paper 1.0
Author-Name: Kym Pram
Author-Name-First: Kym
Author-Name-Last: Pram
Author-Name: Burkhard C. Schipper
Author-Name-First: Burkhard C.
Author-Name-Last: Schipper
Author-Workplace-Name: Department of Economics, University of California Davis
Title: Efficient Mechanisms under Unawareness
Abstract: We study the design of efficient mechanisms under asymmetric awareness and information. Unawareness refers to the lack of conception rather than the lack of information. Assuming quasi-linear utilities and private values, we show that we can implement in conditional dominant strategies a social choice function that is utilitarian ex-post efficient when pooling all awareness of all agents without the need of the social planner being fully aware ex-ante. To this end, we develop novel dynamic versions of Vickrey-Clarke-Groves mechanisms in which types are revealed and subsequently elaborated at endogenous higher awareness levels. We explore how asymmetric awareness affects budget balance and participation constraints. We show that ex-ante unforeseen contingencies are no excuse for deficits. Finally, we propose a modified reverse second price auction for efficient procurement of complex incompletely specified projects.
Length: 36
File-URL: https://repec.dss.ucdavis.edu/files/ipla6i9p36jtdzpc5twgoy3ja8gl/mechunaw19.pdf
File-Format: application/pdf
Number: 372
Classification-JEL: D83
KeyWords: dynamic mechanism design, VCG mechanisms, auctions versus negotiations, unknown unknowns, complex projects
Creation-Date: 20250405
Handle: RePEc:cda:wpaper:372