Theoretical Economics
Journal of the Econometric Society
Edited by: Federico Echenique • ISSN (e): 1555-7561 • ISSN (print): 1933-6837
Edited by: Federico Echenique • ISSN (e): 1555-7561 • ISSN (print): 1933-6837
Theoretical Economics: Jan, 2019, Volume 14, Issue 1
https://doi.org/10.3982/TE2226
p. 39-69
We study full surplus extraction and implementation in dynamic environments.
We exploit intertemporal correlations of agents' types to construct
within-period ex post incentive compatible mechanisms. First, we formulate
one-shot environments, in which a single agent has a hidden type and
the planner observes a public signal about the agent's type after
a type-contingent allocation is chosen. We propose necessary and sufficient
conditions for full surplus extraction (strong detectability)
and for implementability of the targeted allocation rule (weak
detectability) in this one-shot problem. We decompose the general
dynamic problem into one-shot problems, and obtain sufficient conditions
for surplus extraction and implementation.