First Best Implementation with Costly Information Acquisition

Abstract

We study a mechanism design model with flexible but costly information acquisition. There is a principal and I ≥ 4 agents. The principal and the agents share a common prior over the set of payoff-relevant states of the world. The principal proposes a mechanism to the agents who can then acquire information about the state of the world by privately designing a signal device. As long as it is costless for each agent to acquire a signal that is pairwise independent from the state of the world, we show that there exists a mecha-nism which allows the principal to implement any social choice rule at zero information acquisition cost to the agents.

Reference

Daniil Larionov, Hien Pham, Takuro Yamashita, and Shuguang Zhu, “First Best Implementation with Costly Information Acquisition”, TSE Working Paper, n. 21-1261, November 2021, revised April 2022.