This paper studies optimal auction design when the seller can affect the buyersʼ valuations through an unobservable ex ante investment. The key insight is that the optimal mechanism may have the seller play a mixed investment strategy so as to create correlation between the buyersʼ otherwise...

We study the principal–agent problem. We show that b-convexity of the space of products, a condition which appears in a recent paper by Figalli, Kim and McCann (2011) [9], is necessary to formulate the problem as a maximization over a convex set. We then show that when the dimension m of the...

We examine an infinite horizon model of quality growth for a durable goods monopoly. The seller may offer any bundle(s) of current and previous quality improvements (upgrades). Subgame perfect equilibrium seller payoffs range from capturing the full social surplus down to only the initial flow...

In markets as diverse as that for specialized industrial equipment or that for retail financial services, sellers or intermediaries may earn profits both from the sale of products and from the provision of pre-sale consultation services. We study how a seller optimally chooses the costly quality...

The Generalized Second Price (GSP) auction is the primary auction used for monetizing the use of the Internet. It is well-known that truthtelling is not a dominant strategy in this auction and that inefficient equilibria can arise. Edelman et al. (2007) [11] and Varian (2007) [36] show that an...

We study a contract design setting in which the contracting parties cannot commit not to renegotiate previous contract agreements. In particular, we characterize the outcome functions that are implementable for an uninformed principal and an informed agent if, having observed the agent's...

In a class of informed principal problems with common values, we define iteratively a particular allocation which we call the assured allocation. It is comparatively easy to calculate and straightforward to interpret. It always exists, is unique and continuous in the priors. It is undominated,...

Using a mechanism design framework, we characterize how a profit-maximizing intermediary can design matching markets when each agent is privately informed about his quality as a partner. Sufficient conditions are provided that ensure a version of positive assortative matching (what we call...

The framework of incentive compatible finite direct coordination mechanisms in the sense of Myerson (1982) [5] is isomorphic to a framework of incentive compatible stochastic mediated contracts in the sense of Rahman and Obara (2010) [11] and Rahman (2009) [10]. The equivalence follows because...