Abstract
Information plays a crucial role in mechanism design problems. A potential complication is that buyers may be inattentive, and so their information may endogenously and flexibly depend on the offered mechanism. I show that it is without loss of generality to consider contour mechanisms, which comprise triplets of allocation probabilities, prices, and beliefs, and are uniquely determined by a single such point. The mechanism design problem then reduces to Bayesian persuasion along the optimal contour. This reduction has significant implications for both the implementation of the optimal mechanism and the revenues that can be achieved.
| Original language | English |
|---|---|
| Pages (from-to) | 1949-1984 |
| Number of pages | 36 |
| Journal | American Economic Review |
| Volume | 112 |
| Issue number | 6 |
| DOIs | |
| State | Published - Jun 2022 |
Bibliographical note
Funding Information:* Hebrew University (email: jeffrey.mensch@mail.huji.ac.il). Jeffrey Ely was the coeditor for this article. This paper was previously circulated under the title “Screening Inattentive Agents.” I would like to thank Alex Gershkov, Konrad Mierendorff, Doron Ravid, Jakub Steiner, and Balazs Szentes, as well as various seminar participants at Tel Aviv University and the Technion for helpful conversations and comments. Four anonymous referees and the editor made very useful critiques and suggestions that greatly improved the paper. This project was generously supported by Israel Science Foundation grant 798/18. Tal Shewlker provided excellent research assistance. Michael Borns provided scientific editing services.
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