Informational Smallness and the Scope for Limiting Information Rents

Gizatulina, Alia; Hellwig, Martin

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Informational Smallness and the Scope for Limiting Information Rents

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Gizatulina, Alia
Max Planck Institute for Research on Collective Goods, Max Planck Society;

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Hellwig, Martin
Max Planck Institute for Research on Collective Goods, Max Planck Society;

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http://www.coll.mpg.de/pdf_dat/2009_28online.pdf
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Gizatulina, A., & Hellwig, M. (2009). Informational Smallness and the Scope for Limiting Information Rents.

Cite as: https://hdl.handle.net/11858/00-001M-0000-0028-6E0C-6

Abstract

For an incomplete-information model of public-good provision with interim participation constraints, we show that efficient outcomes can be approximated, with approximately full surplus extraction, when there are many agents and each agent is informationally small. The result holds even if agents' payoffs cannot be unambiguously inferred from their beliefs, i.e., even if the so-called BDP property ("Beliefs Determine Preferences") of Neeman (2004) does not hold. The contrary result of Neeman (2004) rests on an implicit uniformity requirement that is incompatible with the notion that agents are informationally small because there are many other agents who have information about them.