TITLE:
Two-Dimensional Mechanism Design and Implementability by an Indirect Mechanism
AUTHORS:
Naoki Kojima
KEYWORDS:
Multi-Dimensional Mechanism, Indirect Mechanism, Budget Constraint, Reduction of Dimension, Revelation Principle
JOURNAL NAME:
Theoretical Economics Letters,
Vol.7 No.6,
September
12,
2017
ABSTRACT: This paper studies the problem on two-dimensional
mechanism design where the buyer’s taste and budget are his private
information. The paper investigates the problem by the method of
dimension-reduction, i.e., by
focusing only on the buyer’s budget and constructing an indirect mechanism:
function of one variable, the buyer’s budget. It is an approach quite antipodal
to that by Kojima [1] where he focused on the
buyer’s taste instead of his budget. It is shown that the seller does not lose any
money by adopting the indirect mechanism of this paper. In other words, the
seller’s revenue-maximizing direct mechanism is implemented by such an indirect
mechanism