ESSEC Working Papers,
ESSEC Research Center, ESSEC Business School

Abstract: This paper reconsiders the general informed principal model with unilateral private information and common values. First, it identifies some fundamental properties of the Rothschild-Stiglitz-Wilson (RSW) allocation (i.e., the undominated for the principal allocation within the set of incentive compatible and individually rational for the agent type by type allocations). Based on these properties: (i) it constructs a more robust, and perhaps simpler, proof of the "if part" of Theorem 1 (i.e., the main result) of Maskin and Tirole (1992), and, (ii) it establishes that if the principal is restricted to offering mechanisms in which only she makes announcements (e.g., direct revelation mechanisms), then the conclusion of that theorem holds even in environments in which the RSW allocation is not interim efficient relative to any non-degenerate beliefs. Second, it provides a sufficient condition that allows for the complete characterisation of the set of equilibrium allocations even in environments in which single-crossing is not satisfied.

Keywords: Mechanism design; Informed principal; Rothschild-Stiglitz-Wilson allocation; Perfect Bayesian equilibrium

JEL-codes: C72; D82

22 pages, April 2019

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