“Unobservable Mechanisms: Can Mechanism Designers Exploit Buyers’ Market Information” by Michael Peters
The Unversity of British Columbia
It is known that mechanism designers can extract agents' information about competitors' mechanisms in a competing mechanism game. This makes it possible for sellers to punish each other for deviations even when they do not directly observe other sellers' mechanisms. This allows for very collusive equilibria. This paper is concerned with whether these collusive equilibria can be sustained in large markets. We provide conditions under which collusive equilibria will persist in large markets and conditions under which all equilibria of the competing mechanism game will become competitive.