Essays on Mechanism Design with Limited Communication and Congestion in Global GamesPublic Deposited
In the first part of the dissertation I study mechanism design under limited communication. Chapter 1 offers a detailed analysis of auctions with simultaneous limited communication. I solve for both welfare and revenue maximizing equilibria. The striking feature of optimal equilibria is that they are asymmetric even when the setup is ex ante completely symmetric. Asymmetry is twofold: in the strategies as well as in the mechanism. Furthermore, I show that with the same amount of communication even higher welfare can be achieved when communication is sequential. Sequential communication, in turn, is studied in detail in Chapter 2. I study a model in which the seller is selling an object to two potential buyers. Communication is restricted to binary questions the seller can ask. I characterize welfare maximizing equilibria of the model in which the seller commits to the total number of questions. The communication protocol that arises in such an equilibrium requires the seller to ask one of the buyers all the questions but one, followed by a single question to the other buyer. In the second part of the dissertation, namely in Chapter 3, I study Congestion in Global Games. I show that the cutoff equilibria might fail to exist because of the congestion effects. In particular, they do not exist when players' private information is very precise and the required level of coordination on the risky action small. In response I construct interval equilibria; equilibria in which only players with intermediate signals coordinate on the risky action. Finally, I show that an interval equilibrium exists for the set of parameters under which a cutoff equilibrium does not.