Incomplete Information VCG Contracts for Common Agency
Tal Alon, Ron Lavi, Elisheva S. Shamash, Inbal Talgam-Cohen

TL;DR
This paper extends VCG contracts to incomplete information settings in common agency models, ensuring welfare maximization, truthfulness, and participation, while analyzing the inherent tradeoffs and providing polynomial-time algorithms for their implementation.
Contribution
It introduces and characterizes incomplete information VCG (IIVCG) contracts, proving their uniqueness and designing polynomial-time algorithms for their existence and construction.
Findings
IIVCG contracts guarantee truthfulness and welfare maximization.
A polynomial-time algorithm determines the existence of IIVCG contracts.
A graph-theoretic condition ensures the existence of IIVCG contracts.
Abstract
We study contract design for welfare maximization in the well known "common agency" model of [Bernheim and Whinston, 1986]. This model combines the challenges of coordinating multiple principals with the fundamental challenge of contract design: that principals have incomplete information of the agent's choice of action. Motivated by the significant social inefficiency of standard contracts for such settings (which we formally quantify using a price of anarchy/stability analysis), we investigate whether and how a recent toolbox developed for the first set of challenges under a complete-information assumption, VCG contracts [Lavi and Shamash, 2019], can be extended to incomplete information. We define and characterize the class of "incomplete information VCG contracts (IIVCG)", and show it is the unique class guaranteeing truthfulness of the principals and welfare maximization by the…
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Taxonomy
TopicsAuction Theory and Applications · Economic theories and models · Law, Economics, and Judicial Systems
