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Published March 2007 | metadata_only
Journal Article

A general characterization of interim efficient mechanisms for independent linear environments


We consider the class of Bayesian environments with independent types, and utility functions which are both quasi-linear in a private good and linear in a one-dimensional private-value type parameter. We call these independent linear environments. For these environments, we fully characterize interim efficient allocation rules which satisfy interim incentive compatibility and interim individual rationality constraints. We also prove that they correspond to decision rules based on virtual surplus maximization, together with the appropriate incentive taxes. We illustrate these techniques with applications to auction design and public good provision.

Additional Information

© 2006 Elsevier. Received 19 November 2003; revised 1 December 2005. Available online 2 March 2006. The financial support of the National Science Foundation is gratefully acknowledged, grants SES-0079301 and ITR/AP SES-0121478. This is a revised version of a lecture presented at the CORE Conference in Memory of Louis-André Gérard-Varet, January, 2003. Earlier versions were presented at Northwestern University and the 1999 Midwest Mathematical Economics meeting at University of Illinois. We thank seminar participants and two referees for comments, and are grateful to Gregory Pavlov for finding an error in an earlier version of the paper.

Additional details

August 22, 2023
August 22, 2023