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Free keywords:
Mechanism Design, Psychological Games, Social Preferences, Reciprocity
JEL:
C70 - General
JEL:
C72 - Noncooperative Games
JEL:
D02 - Institutions: Design, Formation, Operations, and Impact
JEL:
D03 - Behavioral Microeconomics: Underlying Principles
JEL:
D82 - Asymmetric and Private Information; Mechanism Design
JEL:
D86 - Economics of Contract: Theory
Abstract:
We introduce intention-based social preferences into mechanism design. We explore information structures that dier with respect to what is commonly known about the weight that agents attach to reciprocal kindness. When the designer has no information on reciprocity types, implementability of an incentive-compatible social choice function is guaranteed if it satises an additional insurance property. By contrast, precise information on reciprocity types may imply that all ecient social choice functions are implementable. We show how these results extend to a two-dimensional mechanism design setting where the agents have private information about their material payo types and their reciprocity types. We also provide a systematic account of the welfare implications of intentionality.
